What is a LIFO reserve?
A) The difference between the LIFO inventory and the amount used for internal reporting purposes.
B) The tax savings attributed to using the LIFO method.
C) The current effect of using LIFO on net income.
D) Change in the LIFO inventory during the year.

Question

Quizplus · Accepted Answer

A LIFO reserve is the difference between the value of inventory calculated using the Last-In-First-Out (LIFO) method and the value of inventory calculated using another method such as First-In-First-Out (FIFO) for internal reporting purposes. This reserve is used to adjust the LIFO method's inventory value to the cost on a FIFO basis.

What Is a LIFO Reserve