Milford Company had 400 units of "Tank" in its inventory at a cost of $6 each. It purchased 600 more units of "Tank" at a cost of $9 each. Milford then sold 700 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by
A) $ -0-
B) $300.
C) $600.
D) $900.

Question

Quizplus · Accepted Answer

The LIFO liquidation overstated normal gross profit by $300. This is because the cost of goods sold under LIFO is higher than the cost of goods sold under FIFO. The difference between the two is the amount of the LIFO liquidation.

Milford Company Had 400 Units of "Tank" in Its Inventory