The LIFO reserve is
A)the difference between the LIFO inventory cost and the average cost method
B)the difference between the LIFO inventory cost and the FIFO inventory cost
C)the income tax savings from using the LIFO method
D)the reserve set aside for income taxes for the LIFO method

Question

Quizplus · Accepted Answer

The LIFO reserve is the difference between the LIFO inventory cost and the FIFO inventory cost. This reserve represents the amount by which the cost of inventory would have been higher under FIFO than it is under LIFO. It is used to adjust financial statements to reflect inventory at an average cost basis instead of LIFO during inventory valuation analysis.

The LIFO Reserve Is