HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2018 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2017. Assuming HH has a 30% income tax rate:
A) Its reported cost of goods for 2018 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements.
B) Its reported cost of goods for 2018 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements.
C) Its reported cost of goods sold for 2018 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements.
D) Its reported cost of goods sold for 2018 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements.

Question

Quizplus · Accepted Answer

The Answer of HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2018 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2017. Assuming HH has a 30% income tax rate:
A) Its reported cost of goods for 2018 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements.
B) Its reported cost of goods for 2018 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements.
C) Its reported cost of goods sold for 2018 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements.
D) Its reported cost of goods sold for 2018 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements.

HH Company Uses LIFO