Which of the following is not considered an advantage of LIFO when prices are rising?
A) The inventory will be overstated.
B) The more recent costs are matched against current revenues.
C) There will be a deferral of income tax.
D) A company's future reported earnings will not be affected substantially by future price declines.

Question

Quizplus · Accepted Answer

LIFO assumes that the most recent inventory items are sold first, so when prices are rising, the cost of goods sold will be higher and the inventory on hand will be valued at older, lower prices. This results in a lower net income and lower taxes in the short term. However, because the inventory is valued at older, lower prices, it may be overstated when compared to current market values. This is not an advantage of LIFO when prices are rising.

Which of the Following Is Not Considered an Advantage of LIFO