Unusually high income resulted when Vincent Inc. cut back its inventory levels. This effect is:

Question

Quizplus · Accepted Answer

This effect is called LIFO liquidation, which occurs when a company using LIFO (last-in, first-out) accounting sells older inventory that was purchased at a lower cost than the newer inventory. This can result in a higher income in the short term because the cost of goods sold is lower, but it can also lead to lower income in the long term as the company eventually runs out of the older, lower-cost inventory to sell.

Unusually High Income Resulted When Vincent Inc