In calculating gross profits, a firm utilizing LIFO inventory accounting would assume that
A)all sales were from current production.
B)all sales were from beginning inventory.
C)sales were from current production until current production was depleted, and then would use sales from beginning inventory.
D)all sales were for cash.

Question

Quizplus · Accepted Answer

LIFO (Last In, First Out) inventory accounting assumes that the most recently acquired or produced inventory is sold first. Therefore, in calculating gross profits, a firm utilizing LIFO inventory accounting would assume that sales were from current production until the current production was depleted, and then would use sales from beginning inventory. This is because under LIFO, the cost of goods sold is calculated using the cost of the most recent inventory purchases, which are typically the highest in cost, leading to a lower gross profit than if FIFO (First In, First Out) inventory accounting was used.

In Calculating Gross Profits, a Firm Utilizing LIFO Inventory Accounting