If inventory levels are stable or increasing, an argument which is not an advantage of the LIFO method as compared to FIFO is
A) income taxes tend to be reduced in periods of rising prices.
B) cost of goods sold tends to be stated at approximately current cost on the income statement.
C) cost assignments typically parallel the physical flow of goods.
D) income tends to be smoothed as prices change over time.

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) does not typically parallel the physical flow of goods, as it assumes the last items added to inventory are the first ones sold, which is not always how goods are physically moved or sold in reality. Choices A, B, and D are considered advantages of LIFO in certain circumstances.

If Inventory Levels Are Stable or Increasing, an Argument Which