Which of the following statements is correct?
A)FIFO results in a lower net income than LIFO when costs are rising.
B)LIFO results in a higher net income than FIFO when costs are rising.
C)LIFO results in a higher net income than FIFO when costs are falling.
D)LIFO results in the same net income as FIFO when costs are rising.

Question

Quizplus · Accepted Answer

When unit costs are falling,FIFO produces a higher cost of goods sold (resulting in a lower gross profit and a lower net income)when compared to LIFO.On the other hand,when unit costs are rising,FIFO produces a lower cost of goods sold (resulting in a higher gross profit and a higher net income)when compared to LIFO.

Which of the Following Statements Is Correct