GG Inc Uses LIFO

question 100

Multiple Choice

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2013 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2012. Assuming GG has a 40% income tax rate:

• A)Its reported cost of goods sold for 2013 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
• B)Its reported cost of goods sold for 2013 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
• C)Its reported net income for 2013 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
• D)Its reported net income for 2013 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.

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Definitions:

Patents

Patents are government grants that give inventors exclusive rights to their inventions, preventing others from making, using, or selling the invention for a certain period.

Capital Expenditure

Resources utilized by a business to purchase, improve, and upkeep tangible assets like real estate, factories, or machinery.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company’s balance sheet.

Asset Account

An account on a balance sheet that represents a resource owned or controlled by a company, expected to produce future economic benefits.