Question

Which of the following statements is not true?

Multiple Choice

• The physical flow of goods always determines the choice of depreciation method a company chooses.

• Inventory that is sold is recorded as Cost of Goods Sold on the Income Statement.

• The Specific Identification method is generally used for high cost inventory.

• A company's depreciation expense recorded in their financial statements can be different than that reported for income tax.

Answer 1

The physical flow of goods always determines the choice of depreciation method a company chooses is not true

The physical flow of goods matches with the inventory method the company chooses.

Depreciation method is based on pattern of usage of asset during it's useful life.

Inventory sold is reported as Cost of Goods Sold on the Income Statement.

The depreciation expense for tax and book purposes can be different and is accounted as temporary difference.

Option A is correct