In a period of rising prices which inventory method generally provides the greatest amount of net income?
A) Average cost.
B) FIFO.
C) LIFO.
D) Specific identification.

Question

Quizplus · Accepted Answer

In a period of rising prices, the FIFO (First-In, First-Out) inventory method generally results in the highest net income. This is because the older, lower-cost items are recorded as sold first, leaving the newer, higher-cost items in inventory. Consequently, the cost of goods sold under FIFO is lower than it would be under other methods, leading to a higher gross margin and thus a higher net income.

In a Period of Rising Prices Which Inventory Method Generally