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

Question

Quizplus · Accepted Answer

LIFO assumes that the last items purchased are the first ones sold, so when costs are decreasing, the newer (cheaper) inventory is sold first, resulting in a higher cost of goods sold and lower net income under FIFO.

When Costs to Purchase Inventory Are Falling Over Time,using LIFO