Johnson Company had 400 units of "Tank" in its inventory at a cost of $4 each.It purchased 600 more units of "Tank" at a cost of $6 each.Johnson then sold 700 units at a selling price of $10 each.The LIFO liquidation overstated normal gross profit by
A)$ -0-
B)$200.
C)$400.
D)$600.

Question

Quizplus · Accepted Answer

The LIFO liquidation overstated normal gross profit by $200. This is because the cost of goods sold under LIFO is higher than the cost of goods sold under FIFO. As a result, the gross profit is lower under LIFO than under FIFO.

Johnson Company Had 400 Units of "Tank" in Its Inventory