When reported in financial statements, a LIFO allowance account usually:
A) Is shown in the firm's income statement.
B) Is added to LIFO cost to indicate what the inventory would cost on a FIFO basis.
C) Indicates the effect on income if LIFO were not used.
D) Shows the current rate of inflation for that asset.

Question

Quizplus · Accepted Answer

A LIFO allowance account is used to adjust LIFO cost to reflect what inventory would have cost on a FIFO basis. Therefore, it is added to the LIFO cost to indicate the inventory's cost on a FIFO basis. It is not shown in the income statement or used to indicate the effect on income if LIFO were not used, nor does it show the current rate of inflation for that asset.

When Reported in Financial Statements, a LIFO Allowance Account Usually