If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is
A) periodic
B) LIFO
C) FIFO
D) average cost

Question

Quizplus · Accepted Answer

FIFO (First-in-First-Out) assumes that the oldest items in inventory are sold first, which means that the cost of goods sold will reflect the lower costs of the earlier purchases. As prices are rising, the earlier purchases would have a lower cost, leading to a lower cost of goods sold and higher net income. Thus, FIFO will yield the highest net income.

If Merchandise Inventory Is Being Valued at Cost and the Price