Choose the statement which is correct. Assume that inventory prices are rising.
A)The LIFO method gives the highest closing inventory figure in the statement of financial position.
B)The FIFO method gives the highest closing inventory figure in the statement of financial position.
C)The FIFO method gives the lowest closing inventory figure in the statement of financial position.
D)The LIFO method gives the lowest figure for cost of sales.

Question

Quizplus · Accepted Answer

Under the FIFO method, the oldest inventory items are assumed to be sold first, which means that the cost of goods sold will be based on the prices of the oldest inventory items, which are likely to be lower than the current prices. This results in a higher closing inventory figure and lower cost of goods sold compared to the LIFO method. Therefore, in the scenario where inventory prices are rising, the FIFO method would give the highest closing inventory figure in the statement of financial position.

Choose the Statement Which Is Correct