LIFO liquidation
A)occurs as a result of selling more units than are purchased during the period.
B)occurs as a result of selling less units than are purchased during the period.
C)occurs as a result of selling the same number of units that are purchased during the period.
D)often results in favorable tax consequences if a company is using LIFO.

Question

Quizplus · Accepted Answer

LIFO liquidation occurs when a company sells more units than it purchases during a period, which leads to the use of older, lower-cost inventory layers. This can result in an increase in cost of goods sold and a decrease in net income. However, it can also result in favorable tax consequences for a company that uses LIFO accounting because it can reduce taxable income by using older, lower-cost inventory layers.

LIFO Liquidation