If two companies each use different inventory accounting methods,the companies can be made comparable from information reported in the financial statements by
A)converting the FIFO Reserve to a LIFO inventory.
B)converting inventory at cost to inventory at lower of cost or market (net realizable value).
C)converting cost of goods sold to lower of cost or market (net realizable value).
D)converting inventory on a LIFO basis to a FIFO basis using the LIFO Reserve.

Question

Quizplus · Accepted Answer

The best choice is converting inventory on a LIFO basis to a FIFO basis using the LIFO Reserve. This adjustment will make the inventory values of the two companies comparable. It will also help in comparing the cost of goods sold between the two companies. Converting the FIFO Reserve to a LIFO inventory, converting inventory at cost to inventory at lower of cost or market (net realizable value), and converting cost of goods sold to lower of cost or market (net realizable value) are not appropriate adjustments for comparing the financial statements of the two companies.

If Two Companies Each Use Different Inventory Accounting Methods,the Companies