Which of the Following Is a Disadvantage to Business of the LIFO

question 40

Multiple Choice

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

• A) It is difficult for a computer program to apply the method.
• B) It understates the balance sheet value for inventory.
• C) Current income is matched with the most recent costs of acquiring goods.
• D) If it is allowed for tax purposes, in times of rising prices it results in less tax being paid in the current period.

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Definitions:

Semanticity

The quality of language that allows it to convey meaning through the use of symbols with agreed-upon interpretations.

Instinct

An innate, typically fixed pattern of behavior in animals that is responsive to specific stimuli and critical for survival.

Memory

The processes by which information is encoded, stored, and retrieved.

Functional Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used, preventing them from seeing potential alternative uses.