Which of the following statements is not true?
A)Differences in cash flows between LIFO and FIFO inventory methods are a direct result of the differences in the purchases.
B)Differences in cash flows between LIFO and FIFO inventory methods are caused by differences in taxes.
C)The amount of cash to acquire inventory is the same for companies that use LIFO as for those companies that use FIFO.
D)The primary determinant in selecting an inventory costing method should be the ability of the method to accurately reflect the net income of the period.

Question

Quizplus · Accepted Answer

A) The statement that differences in cash flows between LIFO (Last In, First Out) and FIFO (First In, First Out) inventory methods are a direct result of the differences in the purchases is not true. The main reason for differences in cash flows between these methods is due to the timing of when the cost of goods sold (COGS) is recognized, which affects taxable income and thus taxes paid, not directly the differences in purchases.

Which of the Following Statements Is Not True