单选题
During deflation and decreasing inventory quantities, a company using LIFO rather than FIFO. What is the effect on cost of goods sold and cash flows? Cost of Good Sold Cash Flow ①A. lower lower
②B. higher lower
③C. lower higher.
【正确答案】
A
【答案解析】In this situation, LIFO results in lower cost of goods sold because it uses the more recent and lower costs than LIFO. LIFO results in lower cash flows because the cash on income taxes is a percentage(the marginal tax rate) of the difference in inventory values. Thus, with LIFO:
Sales
{{U}}-COGS{{/U}}
(smaller)
EBT
(larger)
{{U}}-Taxes
(larger){{/U}}
Because taxes paid out are a cash outflow.
EAT
(larger)
If taxes are larger, then cash flow ill be smaller.