Dervish Company uses LIFO for all of its inventories. During its second quarter of 2009, Dervish experienced a LIFO liquidation. Dervish fully expects to replace the liquidated inventory in the early part of the third quarter. How should Dervish report the inventory temporarily liquidated on its income statement for the second quarter

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03-08-2020
Business

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Dervish Company uses LIFO for all of its inventories. During its second quarter of 2009, Dervish experienced a LIFO liquidation. Dervish fully expects to replace the liquidated inventory in the early part of the third quarter. How should Dervish report the inventory temporarily liquidated on its income statement for the second quarter

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topeadeniran2 topeadeniran2 · Answer 1 · 2020-08-06T04:25:45+02:00

Answer: The cost of the goods that are sold for the second quarter should consist of the expected replacement cost of the goods that are temporarily liquidated.

Explanation:

From the question, we are informed that Dervish Company uses LIFO for all of its inventories and that during its second quarter of 2009, Dervish experienced a LIFO liquidation. We are further told that Dervish fully expects to replace the liquidated inventory in the early part of the third quarter.

When Dervish is reporting the inventory temporarily liquidated on its income statement for the second quarter, the cost of the goods that are sold for the second quarter should consist of the expected replacement cost of the temporarily liquated goods.