Question

What is the LIFO reserve?An amount used to adjust inventory to the lower-of-cost-or-marketThe difference between the value of the inventory under LIFO and the value under FIFOThe difference between cost of goods sold under LIFO compared to FIFOAn amount used to adjust the LIFO inventory to historical cost

Answer 1

The difference between the value of the inventory under LIFO and the value under FIFO

Step-by-step explanation:

The Lifo reserve an inventory account that represents the difference between the FIFO and LIFO inventory reporting methods. The account is used to bridge the gap between the two reporting systems. It is applied when a company uses FIFO to track stock movement and LIFO in preparing financial statements.

A credit balance in the LIFO reverse helps reduce the cost of inventory when reporting in the balance sheet.