Which of the following is/are true under GAAP?
I. Inventories can only be "written down" but not "written up."
II. Marketable securities are carried at acquisition cost.
III. For income tax purposes, LIFO is preferable to FIFO during inflation.
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A. B. C. D.Explanation
(I) is not true since after a write-down, inventories can be written back up to the original cost if the prices of goods increase sufficiently. (II) is also not true since marketable securities are carried at current market value. Finally, when prices are rising, the COGS under LIFO is higher than that under FIFO, leading to lower tax payments.