A LIFO liquidation during periods when prices are increasing results in a company:
A) recording a large inventory write down.
B) recording higher earnings than it would have if it had used FIFO.
C) recording lower earnings than it would have if it had used FIFO.
D) having operational problems, but no financial statement effects.

Question

Quizplus · Accepted Answer

A LIFO liquidation during periods of rising prices results in older, lower-cost inventory being sold, which increases the cost of goods sold less than if newer, higher-cost inventory were sold, thus increasing earnings compared to FIFO.

A LIFO Liquidation During Periods When Prices Are Increasing Results