Question Details

Which of the following is true regarding the use of LIFO for inventory valuation 



1.	Which of the following statements is not true as it relates to the dollar-value LIFO inven¬tory method?
a.	It is easier to erode LIFO layers using dollar-value LIFO techniques than it is with specific goods pooled LIFO.
b.	Under the dollar-value LIFO method, it is possible to have the entire inventory in only one pool.
c.	Several pools are commonly employed in using the dollar-value LIFO inventory method.
d.	Under dollar-value LIFO, increases and decreases in a pool are determined and measured in terms of total dollar value, not physical quantity.

	2.	Which of the following is not considered an advantage of LIFO when prices are rising?
a.	The inventory will be overstated.
b.	The more recent costs are matched against current revenues.
c.	There will be a deferral of income tax.
d.	A company's future reported earnings will not be affected substantially by future price declines.

3.	Which of the following is true regarding the use of LIFO for inventory valuation ?
a.	If LIFO is used for external financial reporting, then it must also be used for internal reports.
b.	For purposes of external financial reporting, LIFO may not be used with the lower-of-cost-or-net realizable value approach.
c.	If LIFO is used for external financial reporting, then it cannot be used for tax purposes.
d.	None of these.

	4.	If inventory levels are stable or increasing, an argument which is not an advantage of the LIFO method as compared to FIFO is
a.	income taxes tend to be reduced in periods of rising prices.
b.	cost of goods sold tends to be stated at approximately current cost on the income statement.
c.	cost assignments typically parallel the physical flow of goods.
d.	income tends to be smoothed as prices change over time.



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