Emley Company has been using the LIFO method of inventory valuation for 10 years, since it began operations. Its 2014 ending inventory was $50,000, but it would have been $75,000 if FIFO had been used. Thus, if FIFO had been used, Emley's income before income taxes would have been
A) $25,000 greater over the 10-year period.
B) $25,000 less over the 10-year period.
C) $25,000 greater in 2014.
D) $25,000 less in 2014.

Question

Quizplus · Accepted Answer

Using FIFO instead of LIFO would have resulted in a higher inventory value, indicating that the cost of goods sold (COGS) would have been lower. This would have led to higher income before taxes over the 10-year period by the difference in inventory valuation, which is $25,000.

Emley Company Has Been Using the LIFO Method of Inventory