Kingman Company had 400 units of "Dink" in its inventory at a cost of $6 each.It purchased 600 more units of "Dink" at a cost of $9 each.Kingman then sold 700 units at a selling price of $15 each.The LIFO liquidation overstated normal gross profit by
A)$ -0-
B)$300.
C)$600.
D)$900.

Question

Quizplus · Accepted Answer

LIFO liquidation overstates normal gross profit by the amount of the difference between the LIFO cost and the FIFO cost of the units sold. In this case, the LIFO cost of the units sold is $6 per unit, while the FIFO cost is $9 per unit. Therefore, the LIFO liquidation overstates normal gross profit by $3 per unit, or $300 in total.

Kingman Company Had 400 Units of "Dink" in Its Inventory