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Accounting Principles MCQs

Which of the following statements would be incorrect in comparing the financial statements of two companies, XYZ and ABC which are identical in all respects except that XYZ uses FIFO and ABC uses LIFO in costing its inventories? Prices have been rising steadily over the last several years.

The inventory of XYZ would be higher than the inventory of ABC

The retained earnings of XYZ would be higher than the retained earnings of ABC

The net income in the current year of XYZ would be higher than the net income of ABC

The tax liability of XYZ would be less than the tax liability of ABC

Answer

Correct Answer: The tax liability of XYZ would be less than the tax liability of ABC

Explanation:

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