Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.
A)During periods of falling prices, LIFO gives the highest gross profit and the lowest closing inventory value.
B)During periods of rising prices, LIFO gives the highest gross profit and the lowest closing inventory value.
C)During periods of rising prices, LIFO gives the lowest gross profit and the lowest closing inventory value.
D)None of the above.

Question

Quizplus · Accepted Answer

During periods of rising prices, the Last In, First Out (LIFO) method results in the newest, most expensive inventory being sold first, leading to lower gross profit due to higher cost of goods sold and a lower closing inventory value, as the older, cheaper inventory remains unsold.

Choose the Statement That Best Describes the Effects of the LIFO