The lower of FIFO cost or market inventory method can be used for tax purposes,but the lower of cost or market cannot be used in conjunction with the LIFO method.

Question

Quizplus · Accepted Answer

This statement is true. The lower of cost or market inventory valuation method can be used for tax purposes, but it cannot be used in conjunction with the LIFO (Last In First Out) method. This is because the LIFO method assumes that the most recently acquired inventory is sold first, which means that the cost of goods sold reflects the cost of the most recent purchases. As a result, if the market value of inventory falls below the cost of the most recently acquired inventory, the LIFO method would not accurately reflect the true value of inventory or the cost of goods sold. Therefore, LIFO accounts cannot use the lower of cost or market inventory valuation method.

The Lower of FIFO Cost or Market Inventory Method Can