When a company uses LIFO for external reporting purposes and FIFO for internal reporting purposes, an Allowance to Reduce Inventory to LIFO account is used. This account should be reported
A) on the income statement in the Other Revenues and Gains section.
B) on the income statement in the Cost of Goods Sold section.
C) on the income statement in the Other Expenses and Losses section.
D) on the balance sheet in the Current Assets section.

Question

Quizplus · Accepted Answer

The Allowance to Reduce Inventory to LIFO account is a contra inventory account and represents the difference between the cost of inventory under the LIFO method and the cost of inventory under an alternative method, such as FIFO. Since this account represents a reduction in the value of inventory, it should be reported on the balance sheet in the Current Assets section.

When a Company Uses LIFO for External Reporting Purposes and FIFO