Asked by Dakota Swader on Jun 20, 2024
Verified
If inventories are valued using the LIFO cost assumption they should not be classified as a current asset on the balance sheet.
Current Asset
Assets that are expected to be converted into cash, sold, or consumed within one year or within the operating cycle of the business, whichever is longer.
LIFO Cost Assumption
The LIFO Cost Assumption is a principle used in the LIFO inventory valuation method, assuming that the most recently acquired items are the first to be sold, impacting the reported income and inventory costs.
Inventories
Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials to be consumed in the production process.
- Understand the classification and valuation of inventory on the balance sheet.
Verified Answer
AF
Alain FloresJun 20, 2024
Final Answer :
False
Explanation :
Inventories valued using LIFO are still considered current assets on the balance sheet. However, their carrying value may not reflect their current replacement cost if inflation has occurred.
Learning Objectives
- Understand the classification and valuation of inventory on the balance sheet.