During a period of rising prices, using FIFO (first-in, first-out) inventory valuation method will result in ________ net income figures than would LIFO (last-in, first-out).
A) higher
B) lower
C) the same
D) less accurate

Question

Quizplus · Accepted Answer

During periods of rising prices, using FIFO, the cost of goods sold is based upon older, less expensive merchandise. Using LIFO, the cost of goods sold would reflect the more recent, more expensive merchandise. FIFO, therefore, yields a smaller cost of goods sold figure. Subtracting this smaller cost of goods sold from the sales revenue will produce a higher net income.

During a Period of Rising Prices, Using FIFO (First-In, First-Out)