Which of the following statements about the computation of cost of goods sold is true?
A) Manufacturing and retail businesses must use the specific identification method for tax purposes.
B) Manufacturing and retail businesses must use the FIFO costing convention for tax purposes.
C) Manufacturing and retail businesses must use the LIFO costing convention for tax purposes.
D) Manufacturing and retail businesses that use the LIFO costing convention for tax purposes must also use LIFO for book purposes.

Question

Quizplus · Accepted Answer

Manufacturing and retail businesses that choose to use the LIFO (Last In, First Out) costing convention for tax purposes are required to also use LIFO for their financial reporting (book purposes) to maintain consistency between tax reporting and financial accounting. This requirement is known as the LIFO conformity rule.

Which of the Following Statements About the Computation of Cost