Question

Select the correct statement concerning LIFO liquidations from the following.

Answer 1

Answer:

Select the correct statement concerning LIFO liquidations from the following.

a. LIFO liquidations often distort net income and may result in substantial tax payments.

b. LIFO liquidations seldom distort net income and do not result in substantial tax payments.

c. LIFO liquidations often distort net income and do not result in substantial tax payments.

d. LIFO liquidations seldom distort nets income and may result in substantial tax payments.

Explanation:

LIFO liquidation refers to the practice of selling or issuing of older merchandise stock or materials in a company's inventory. Therefore, under the LIFO method, the latest purchased or produced goods are removed and expensed first. And so, the old inventory costs remain on the inventory valuation method.