__________ is a true statement.
A)During periods of inflation, LIFO makes the balance sheet less representative of the actual inventory values than if FIFO were used
B)During periods of inflation, FIFO makes the balance sheet less representative of actual inventory values than if LIFO were used
C)After inflation ends, distortion due to LIFO will disappear as inventory is sold
D)During periods of inflation, LIFO overstates earnings relative to FIFO
E)None of the above

Question

Quizplus · Accepted Answer

During periods of inflation, the most recent inventory purchases are the most expensive, and LIFO assumes these are sold first, leading to higher cost of goods sold and lower ending inventory values. This can result in a balance sheet that is less representative of the actual inventory values than if FIFO were used, which assumes the earliest inventory purchases are sold first.

__________ Is a True Statement