The LIFO costing method can result in misleading inventory costs on the balance sheet because the oldest costs are left in ending inventory.

Question

Quizplus · Accepted Answer

The LIFO (Last-In, First-Out) costing method assumes that the last inventory items purchased are the first to be sold, meaning the older and potentially less expensive inventory costs are left in ending inventory. This can lead to misleading inventory costs on the balance sheet, as they may not reflect the true current value of the inventory.

The LIFO Costing Method Can Result in Misleading Inventory Costs