Accountants Should Be Aware That LIFO Liquidations Can Potentially Result

question 73

Multiple Choice

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

• A) If older less costly layers are liquidated, a correspondingly lower cost of goods sold will result.
• B) If older less costly layers are liquidated, the company may be faced with higher taxes for those deferred in previous periods.
• C) If older less costly layers are liquidated, a correspondingly higher gross profit will result.
• D) All of these could result.

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Definitions:

Quantity Supplied

The measure of goods or services available from producers for sale at a particular price.

Equilibrium Price

A market state where the demand for a product matches its supply, resulting in a stable price point.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a certain price over a defined period.

Equilibrium Price

The rate at which supply and demand for a specific good or service are equal, creating a stable market condition.