In periods of inflation,the ________ method of inventory valuation provides a more realistic net income.
A) LIFO
B) FIFO
C) average cost
D) weighted-average cost

Question

Quizplus · Accepted Answer

In periods of inflation, the cost of goods sold (COGS) increases over time, and the LIFO (last-in, first-out) method assumes that the most recent inventory items sold first. This leads to the assumption that COGS is based on the most recent, and therefore most expensive inventory. As a result, gross profit is lower, and net income is seen to be more realistic. Hence, LIFO is a better choice for inventory valuation during inflationary periods.

In Periods of Inflation,the ________ Method of Inventory Valuation Provides