Davis Company Uses LIFO for All of Its Inventories

question 1

Multiple Choice

Davis Company uses LIFO for all of its inventories.During its second quarter of 2009,Davis experienced a LIFO liquidation.Davis fully expects to replace the liquidated inventory in the early part of the third quarter.How should Davis report the inventory temporarily liquidated on its income statement for the second quarter?

• A)Cost of goods sold for the second quarter should include the acquisition cost of the goods temporarily liquidated.
• B)Cost of goods sold for the second quarter should include the expected replacement cost of the goods temporarily liquidated.
• C)Cost of goods sold for the second quarter should not include the expected replacement cost of the goods temporarily liquidated.
• D)Cost of goods sold for the second quarter is not affected by the temporary liquidation of LIFO inventory.

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Definitions:

Bar Chart

A graphical representation of data using bars of varying heights or lengths to compare different categories of information.

Quantitative Axis

A graphical representation axis that displays numerical information, often used in data analysis and statistics.

Bar Charts

Visual tools composed of bars to compare quantities or values across different categories or groups.

Gridlines

The lines on a chart or map that assist in measuring distance or plotting points by forming a consistent, structured background.