If a company is utilizing LIFO inventory costing, what might be the effect on the calculation of Cost of Goods sold in an interim financial statement?
A)cost of goods sold is calculated on a historical cost basis only
B)the interim cost of goods sold includes the replacement cost of temporarily liquidated inventory
C)cost of goods sold is not adjusted for any changes due to liquidation of LIFO inventory
D)any of the effects of liquidation are deferred until year end

Question

If a company is utilizing LIFO inventory costing, what might be the effect on the calculation of Cost of Goods sold in an interim financial statement?
A)​cost of goods sold is calculated on a historical cost basis only
B)​the interim cost of goods sold includes the replacement cost of temporarily liquidated inventory
C)​cost of goods sold is not adjusted for any changes due to liquidation of LIFO inventory
D)​any of the effects of liquidation are deferred until year end

Quizplus · Accepted Answer

In LIFO inventory costing, the cost of goods sold is calculated based on the last inventory items purchased, which are generally the most expensive due to inflation. Therefore, if there is a temporary liquidation of inventory, the cost of goods sold will include the replacement cost of that liquidated inventory, which could lower the overall cost of goods sold. This will be reflected in the interim financial statement.

If a Company Is Utilizing LIFO Inventory Costing, What Might