Question

True or false

although a firm may use different inventory valuation methods, generally accepted accounting principles (gaap) states that these methods must produce the same dollar value for the cost of goods sold.

Answer 1

The statement is false because GAAP allows for different inventory valuation methods, which can result in different values for the cost of goods sold.

Step-by-step explanation:

The statement is false. Under Generally Accepted Accounting Principles (GAAP), a firm may use different inventory valuation methods such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), or average cost method. These methods can lead to different cost of goods sold (COGS) and inventory values due to variation in inventory costs over time. GAAP does not require that different inventory valuation methods produce the same dollar value for the COGS. The choice of inventory valuation method can affect the company's financial statements and tax liability; however, once a method is chosen, consistency in its application is required unless a change can be justified.