CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Companies using LIFO are required to disclose their LIFO reserve. The LIFO reserve is ______.

A. the difference between the inventory at LIFO and the inventory at FIFO
B. the amount of inventory held in reserve in case of LIFO liquidation
C. the difference between the cost of goods sold under LIFO inventory and the cost of goods sold under FIFO inventory
Correct Answer: A

The LIFO reserve shown in the footnotes is the dollar amount difference between the inventory at LIFO and the inventory at FIFO. It can be used to restate the LIFO cost of goods sold to FIFO cost of goods sold.

User Contributed Comments 5

User Comment
stranger LIFO Reserve = difference between Inv @ LIFO and Inv @ FIFO
kalps LIFo inventory is the difference between the inventory under LIFO and the inventory under FIFO
Shelton R(LIFO) = Ivt(FIFO) - Ivt(LIFO)
Indira to Shelton: vice versa:

LIFO Reserve = Inventory at LIFO - Inventory at FIFO
bahodir Indira, Shelton is right:
FIFO Inventory = LIFO Inventory + LIFO Reserve
So,
LIFO Reserve = FIFO Inventory - LIFO Inventory
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