Some Companies That Use a Perpetual Inventory System and the LIFO

Multiple Choice

Some companies that use a perpetual inventory system and the LIFO flow assumption restate their inventories at year-end to the amount indicated by periodic LIFO costing procedures. The primary reason for this adjustment is that:

A) Periodic LIFO often results in a higher valuation of inventory, thus reducing taxable income.
B) This adjustment is necessary to record shrinkage losses.
C) Periodic LIFO often results in a lower valuation of inventory, thus reducing taxable income.
D) Periodic and perpetual costing procedures produce the same results if the year-end inventory has been counted properly. No adjustment would be needed.