Which of the following are true? (check all that apply)
These choices are false: (1) US companies can choose to use LIFO for all of their inventory, even it is in a non-US subsidiary (LIFO can only be used for inventory in the US); (2) If the replacement cost of inventory is higher than the historical cost, companies must use replacement cost on the balance sheet (the rule is lower of cost or market—if replacement cost is market, it can’t be used if higher than historical cost); and (3) Companies with perishable inventory (e.g., food products) must use the FIFO method (flow of costs does not have to match physical flows of goods). The other two choices are true.
These choices are false: (1) US companies can choose to use LIFO for all of their inventory, even it is in a non-US subsidiary (LIFO can only be used for inventory in the US); (2) If the replacement cost of inventory is higher than the historical cost, companies must use replacement cost on the balance sheet (the rule is lower of cost or market—if replacement cost is market, it can’t be used if higher than historical cost); and (3) Companies with perishable inventory (e.g., food products) must use the FIFO method (flow of costs does not have to match physical flows of goods). The other two choices are true.
If the replacement cost of inventory is higher than the historical cost, companies must use replacement cost on the balance sheet
