Assuming inflation,which of the following relationships among inventory valuation methods is incorrectly stated?
A)FIFO has a higher ending inventory balance and a higher net income than LIFO.
B)FIFO has a higher ending inventory balance and a higher net income than weighted-average.
C)LIFO has a higher ending inventory balance and a higher net income than weighted-average.
D)Weighted-average has a higher ending inventory balance and a lower cost of goods sold than LIFO.
E)LIFO has a lower ending inventory balance and a higher cost of goods sold than FIFO.

Question

Quizplus · Accepted Answer

Inflation leads to rising prices, and LIFO method assumes that the latest inventory purchases are sold first. Therefore, during inflation, LIFO assigns higher cost to COGS, and hence producing lower net income and lower ending inventory balance than weighted-average. The other statements are correct during inflation.

Assuming Inflation,which of the Following Relationships Among Inventory Valuation Methods