In a time of rising prices, unrealized holding gains on ending inventory are
A)higher under LIFO than FIFO.
B)higher under FIFO than LIFO.
C)reported on the income statement.
D)required to be reported in notes to the financial statements.
E)none of the above

Question

Quizplus · Accepted Answer

Unrealized holding gains on ending inventory are higher under LIFO than FIFO because LIFO assumes that the most recent purchases are sold first, which means that the ending inventory is made up of older, lower-cost items. This results in a lower cost of goods sold and a higher gross profit.

In a Time of Rising Prices, Unrealized Holding Gains on Ending