Which of the following inventory method will give the highest net earnings in a period of falling prices?
A)FIFO
B)LIFO
C)Specific Identification Method
D)Weighted Average Cost

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) method will give the highest net earnings in a period of falling prices because it assumes that the most recently purchased inventory is sold first. As a result, the cost of goods sold is higher, which reduces net income. In a period of falling prices, this results in higher net earnings because the cost of goods sold is lower than the actual cost of the inventory.

Which of the Following Inventory Method Will Give the Highest