单选题

Jessica Hightower, CFA, is analyzing the financial statements for a local industrial solvent $40 million at the end of 2005. Over the same time period, TYU was able to increase the number of units sold by 7 percent. In making adjustments to the income statement to reflect economic really, Hightower should adjust income（）。

A、 only if the decline was caused by tailing prices.
B、 only if the decline was caused by inventory liquidation.
C、 if the decline was caused by either falling prices or inventory liquidation.

【正确答案】 B

【答案解析】

Reductions in the LIFO reserve that are caused by inventory liquidations will require adjustments to the income statement since the COGS will be artificially low. COGS will be understated as a result of the lower historical cost from inventory booked in previous periods. The lower cost inventory will most likely not be an adequate reflection of current inventory costs.