Under either LIFO or FIFO it is impossible to simultaneously reflect both the balance sheet inventory and cost of goods sold at current cost.

Question

Quizplus · Accepted Answer

Both LIFO and FIFO assume that the cost of earlier purchases (under FIFO) or recent purchases (under LIFO) are representative of the cost of the inventory sold. This means that the cost of goods sold figure will not reflect current costs if the inventory is valued using either method. Similarly, the balance sheet inventory figure will also not reflect current costs, as it will be based on the cost of the oldest inventory under FIFO or the cost of the most recent inventory under LIFO. Therefore, it is impossible to reflect both the balance sheet inventory and cost of goods sold at current cost under either method.

Under Either LIFO or FIFO It Is Impossible to Simultaneously