In a period of rising prices, use of the FIFO rather than LIFO inventory cost flow assumption results in
A)a lower cost of goods sold and a lower ending inventory.
B)a lower beginning inventory and a lower ending inventory.
C)a higher cost of goods sold.
D)a lower cost of goods sold and a higher ending inventory.
E)none of the above

Question

Quizplus · Accepted Answer

In a period of rising prices, the FIFO method assumes that the items sold were the oldest ones in inventory, thus assigning the cost of the oldest items to the cost of goods sold. This results in a lower cost of goods sold and a higher ending inventory, as the newer, more expensive items are left in inventory. Therefore, using the FIFO method instead of LIFO would result in a lower cost of goods sold and a higher ending inventory.

In a Period of Rising Prices, Use of the FIFO