Davis Company uses LIFO for all of its inventories.During its second quarter of 2009,Davis experienced a LIFO liquidation.Davis fully expects to replace the liquidated inventory in the early part of the third quarter.How should Davis report the inventory temporarily liquidated on its income statement for the second quarter?
A)Cost of goods sold for the second quarter should include the acquisition cost of the goods temporarily liquidated.
B)Cost of goods sold for the second quarter should include the expected replacement cost of the goods temporarily liquidated.
C)Cost of goods sold for the second quarter should not include the expected replacement cost of the goods temporarily liquidated.
D)Cost of goods sold for the second quarter is not affected by the temporary liquidation of LIFO inventory.

Question

Quizplus · Accepted Answer

The Answer of Davis Company uses LIFO for all of its inventories.During its second quarter of 2009,Davis experienced a LIFO liquidation.Davis fully expects to replace the liquidated inventory in the early part of the third quarter.How should Davis report the inventory temporarily liquidated on its income statement for the second quarter?
A)Cost of goods sold for the second quarter should include the acquisition cost of the goods temporarily liquidated.
B)Cost of goods sold for the second quarter should include the expected replacement cost of the goods temporarily liquidated.
C)Cost of goods sold for the second quarter should not include the expected replacement cost of the goods temporarily liquidated.
D)Cost of goods sold for the second quarter is not affected by the temporary liquidation of LIFO inventory.

Davis Company Uses LIFO for All of Its Inventories