If a LIFO liquidation occurs during a period of rising prices, which of the following statements about the effects on a firm's financial statements, all other things equal, is generally true?
I. Cost of goods sold increases.
II. Gross profit margin increases.
III. Taxes decrease.
IV. Net income increases.
A) I only
B) II only
C) I and III only
D) II and IV only

Question

Quizplus · Accepted Answer

During a LIFO liquidation in a period of rising prices, older, cheaper inventory is used up, leading to lower cost of goods sold, higher gross profit margin, and increased net income.

If a LIFO Liquidation Occurs During a Period of Rising