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Unformatted text preview: companys beginning inventory at LIFO cost shown in its balance sheet for last year, a LIFO liquidation occurred during the current year. What is the significance of a LIFO liquidation? 1. If a company using LIFO experiences a LIFO liquidation during the year, it may report higher net income and pay more in taxes than if it had used FIFO, even in a period of rising purchase prices for inventory. 2. Since end-of-year purchases are under the control of management which, in turn, can affect net income, the presence of a LIFO liquidation may mean that management is manipulating its net income....
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- Fall '10