In calculating gross profits, a firm utilizing LIFO inventory accounting would assume that
A) all sales were from the current production.
B) all sales were from the beginning inventory.
C) sales were from the current production until current production was depleted, and then sales were from the beginning inventory.
D) all sales were for cash.

Question

Quizplus · Accepted Answer

LIFO (Last-in, First-out) inventory accounting assumes that the most recently acquired inventory is sold first, so when calculating gross profits, LIFO would assume sales were from the current production until the current production was depleted, and then sales were from the beginning inventory. This means that the cost of goods sold would be based on the most recent inventory purchases, which would result in a higher cost of goods sold and lower gross profits compared to other inventory accounting methods.

In Calculating Gross Profits, a Firm Utilizing LIFO Inventory Accounting