Companies Using the LIFO Method May Encounter a Liquidation of Base

question 42

Multiple Choice

Companies using the LIFO method may encounter a liquidation of base period inventories at an interim date that is expected to be replaced by the end of the year. In these cases, cost of goods sold should be charged with the:

• A) cost of the most recent purchases.
• B) average cost of the liquidated LIFO base.
• C) expected replacement cost of the liquidated LIFO base.
• D) none of these.