Which of the Following Statements Is True

question 81

Multiple Choice

Which of the following statements is true?

• A) A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting.
• B) A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement.
• C) Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO.
• D) LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes.

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Definitions:

Widgets

A generic term used to refer to a hypothetical manufactured product or any small device or gadget.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance.

Opportunity Costs

The value of the next best alternative foregone as a result of making a decision.

Production Capacity

The maximum amount of goods or services a facility can produce over a given period under normal working conditions.