The Appropriate Journal Entry for the Transactions Involving the LIFO

question 80

Multiple Choice

The appropriate journal entry for the transactions involving the LIFO reserve and market value adjustments is determined by the particular situation in the firm.If LIFO inventory is greater than FIFO inventory,

• A)the loss account for a decline in market value of inventory could be credited rather than debited if the market value had increased from the previous year but was not greater than cost
• B)the loss account for a decline in market value of inventory could be debited rather than credited if the market value had decreased from the previous year but was not less than cost
• C)the loss account for a decline in market value of inventory could be debited rather than credited if the market value had increased from the previous year but was not greater than cost
• D)the loss account for a decline in market value of inventory could be credited rather than debited if the market value had decreased from the previous year but was not greater than cost

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Definitions:

Prime Costs

The combined costs of direct materials and direct labor which are directly attributable to the production of goods.

Activity-based Costing

An accounting method that assigns costs to products or services based on the activities and resources used to produce them.

Specialized Electric Motors

Electric motors that are designed and manufactured for specific applications or to meet particular requirements, distinguishing them from standard or generic motors.

Cost Drivers

Factors that cause changes in the cost of an activity or operation, influencing the total expenses.