A problem with the specific identification method is that
A) inventories can be reported at actual costs.
B) management can manipulate income.
C) matching is not achieved.
D) the lower-of-cost-or-market basis cannot be applied.

Question

Quizplus · Accepted Answer

The specific identification method allows management to manipulate income by selecting which specific items to sell, thus impacting the cost of goods sold and ultimately net income. This method also does not ensure proper matching of revenues and expenses. However, inventories can still be reported at actual costs and the lower-of-cost-or-market basis can still be applied with this method.

A Problem with the Specific Identification Method Is That