In the case of a change from the lower-of-cost-or-market FIFO to the LIFO inventory method:
A)The taxpayer must value the beginning inventory to be the same as if the company had used the LIFO method for all the years the company was in business.
B)The taxpayer must seek written permission from the IRS in order to make the change.
C)The adjustment due to the change in accounting method must be spread over 3 years,the year of change and the two subsequent years.
D)All of these.
E)None of these.

Question

Quizplus · Accepted Answer

The beginning inventory in the year of the change must be valued at its cost.If market value,rather than cost,was used to value the beginning inventory for the year of the change (i.e. ,the ending inventory for the preceding year),the difference between cost and market is the adjustment due to the change and that adjustment must be spread over three years.Generally,the taxpayer must seek the permission of the IRS before changing accounting methods.A change to LIFO is the exception to this rule.

In the Case of a Change from the Lower-Of-Cost-Or-Market FIFO