Which of the following statements regarding inventory costing methods is true?
A) The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory.
B) During a period of rising prices, LIFO results in a higher income tax expense than does FIFO.
C) Internal Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO.
D) In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial

Question

Quizplus · Accepted Answer

The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory. Option B is incorrect, as during a period of rising prices, LIFO results in a lower income tax expense than does FIFO. Option C is incorrect, as IFRS does not allow the use of LIFO. Option D is partially correct, as in the U.S., if a company uses LIFO on the income tax return, it must also use LIFO for financial reporting purposes.

Which of the Following Statements Regarding Inventory Costing Methods Is