The LIFO reserve is the difference between

A. the value of the inventory under LIFO and the value under average cost.
B. the difference between the value of the inventory under LIFO and the value under FIFO.
C. an amount used to adjust inventory to the lower of cost or market.
D. the amount used to adjust inventory to historical cost.

the difference between the value of the inventory under LIFO and the value under FIFO. (B)

Explanation:

Last In First Out (LIFO) reserve acts as a contra account i.e it’s a ledger account used for the purpose of inventory. Inventory is a current asset account that is found on balance sheet and consist of raw materials, the work-in-progress, and the finished goods accumulated by a company.

The LIFO reserve reveals the differences between the two ways inventory is valued i.e LIFO (last in, first out) and the FIFO (first in, first out). The LIFO reserve shows the difference between the value of inventory under the LIFO and the value of the inventory under FIFO.

1. c

2. b

3. a

4. c

5. a

6. b

7. c

8. c

9.b

10. d

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