QUESTIONS 45 THROUGH 68 RELATE TO FINANCIAL STATEMENT ANALYSIS

50. Assume U.S. GAAP (generally accepted accounting principles) applies unless

otherwise noted.

A company using the LIFO inventory method reports a LIFO reserve at year-end

of $85,000, which is $20,000 lower than the prior year. If the company had used

FIFO instead of LIFO in that year, the company’s financial statements would

have reported:

A. a lower cost of goods sold, but a higher inventory balance.

B. a higher cost of goods sold, but a lower inventory balance.

C. both a higher cost of goods sold and a higher inventory balance.