Gross Income and Inventory Methods
An analyst has determined that Megamore Industries uses the LIFO inventory method.
Megamore’s reported gross income for the year is most likely to be overstated and require
adjustment by the analyst if, during the year, Megamore experienced a(n):
A. increase in inventory prices.
B. decrease in inventory prices.
C. increase in inventory quantities.
D. decrease in inventory quantities.
Answer: D
Is this assuming inflation? It gives no indication of whether inventory prices rose or fell during the quarter. |