Which one of the following is an advantage of LIFO?
A) In periods of rising prices, less income tax is paid.
B) In periods of rising prices, more holding gains are reported in net income.
C) Record keeping and financial statement preparation are easier.
D) Conservative income statements and balance sheet disclosures result from falling prices.

Question

Quizplus · Accepted Answer

In periods of rising prices, the Last In, First Out (LIFO) inventory method results in the most recent, higher-cost inventory being sold first, leading to higher cost of goods sold (COGS) figures. This, in turn, reduces reported net income, which can lead to lower income tax liabilities compared to other inventory accounting methods.

Which One of the Following Is an Advantage of LIFO