Companies adopt different cost flow methods for each of the following reasons except
A) balance sheet effects.
B) cost effects.
C) income statements effects.
D) tax effects.

Question

Quizplus · Accepted Answer

Companies adopt different cost flow methods mainly to reflect the actual flow of costs associated with the respective inventory on their financial statements. The cost flow methods used can have an impact on the cost of goods sold, inventory value, and gross profit, thus affecting the balance sheet and income statement. Additionally, the choice of cost flow method can also impact taxes paid on inventory profits. Cost flow methods are not typically chosen based on reasons related to cost effects.

Companies Adopt Different Cost Flow Methods for Each of the Following