Gordon, Inc., reports using the LIFO cost method. In notes to its financial statements, Gordon discloses inventory of 500 units in 20X1 and 510 units in 20X2 and states a LIFO reserve of $50,000 in 20X1 and $48,000 in 20X2. These inventory disclosures most likely reflect:
Decreasing prices can cause the LIFO reserve to decrease even when the inventory quantity is stable or increasing. A LIFO liquidation is a decrease in the quantity of inventory. To look for an indication of decreasing demand, an analyst would compare the growth rates of inventories and sales.
Take more free practice tests for other ASVAB topics with our cfa level 1 exam