The LIFO Reserve can increase only when:

Question

Quizplus · Accepted Answer

LIFO Reserve is a contra-asset account that measures the difference between the cost of inventory under LIFO and under other inventory methods. The LIFO Reserve increases when inventory costs are rising, as the LIFO method assigns the latest costs to the inventory sold first, resulting in higher costs of goods sold and lower ending inventory values. Thus, the LIFO Reserve increases to reflect this difference between LIFO and other methods, which use older, lower-cost inventory layers to calculate cost of goods sold and ending inventory values. Therefore, option C is the best choice because the LIFO Reserve increases when inventory costs are rising, which is the opposite of options A and B, and not related to option D.

The LIFO Reserve Can Increase Only When