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:

FASB Pronouncements

Official statements and standards issued by the Financial Accounting Standards Board (FASB) that dictate accounting methods and financial reporting practices.

Incremental Benefits

The additional advantages or gains received from an action or decision, beyond what was previously available.

Financial Reporting

Constructing communications that display the fiscal situation of an enterprise to its management team, financial backers, and governmental officials.

Voluntary Disclosure

The practice of a firm releasing non-required information willingly to its stakeholders, aiming to increase transparency and reduce information asymmetry.