Company X uses LIFO while its main competitor, Company Y, uses FIFO. Which of the following statements is true?
A) The difference in inventory costing methods does not affect comparisons of the financial statements because the actual business activities are not affected by which method is used.
B) Company Y is required to report in the Notes to the Financial Statements what the inventory balance would have been under LIFO.
C) It is impossible to make a meaningful comparison of the financial results of the two companies.
D) Company X is required to report in the Notes to the Financial Statements what the inventory balance would

Question

Quizplus · Accepted Answer

Company X, using LIFO, is required to disclose in the notes what the inventory balance would have been under FIFO, known as the LIFO reserve.

Company X Uses LIFO While Its Main Competitor, Company Y