- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 25. Inventories
- Subject 4. The LIFO Method
CFA Practice Question
The LIFO reserve may increase due to ______.
II. more inventory units purchased than units sold
I. inventory price increases
II. more inventory units purchased than units sold
A. I only
B. II only
C. Both I and II
Explanation: The increased LIFO reserve should be used to adjust reported LIFO inventory and COGS.
User Contributed Comments 3
| User | Comment |
|---|---|
| mhtwo | holding prices constant, II is not true. What else are we supposed to assume if this is not specified? |
| CFASac | It says 'may' increase. So if prices increase then II 'may' increase. |
| DariSH | We should suppose that prices are growing if not stated otherwise... |