When costs to purchase inventory are rising,using LIFO leads to reporting ______ cost of goods sold and ______ net income than FIFO.
A) higher; lower
B) higher; higher
C) lower; lower
D) lower, higher

Question

Quizplus · Accepted Answer

LIFO assumes that the most recently purchased inventory items are sold first, which means that the remaining inventory consists of older, lower-cost items. Therefore, when costs are rising, LIFO results in reporting higher costs of goods sold (since the inventory is comprised mostly of higher-cost items) and lower net income.

When Costs to Purchase Inventory Are Rising,using LIFO Leads to Reporting