Noland, Inc

Multiple Choice

Noland, Inc. uses the LIFO method of inventory costing and is facing the possibility of a LIFO liquidation for the current year. Merchandise purchase prices have increased since the LIFO method was adopted. If the company does not purchase additional merchandise before year-end, which one of the following effects will occur as a result of a LIFO liquidation?

A) Reported earnings for the current year will be higher.
B) Income taxes for the current year will be lower.
C) Cost of goods sold for the current year will be higher.
D) Gross margin for the current year will be lower.