When using LIFO,management occasionally deliberately stops normal purchases for the last few weeks of the year in an attempt to boost profits.

Question

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In LIFO (Last-In, First-Out) method of inventory valuation, the cost of the most recently acquired items is matched with revenue first. By intentionally stopping purchases towards the end of the year, the cost of goods sold will be lower, resulting in higher profits. However, this practice can lead to inventory shortages or stock-outs in the future, and it is not considered a sound business practice.

When Using LIFO,management Occasionally Deliberately Stops Normal Purchases for the Last