When prices are rising, the value of ending inventory using the FIFO method rather than LIFO gives:
A) inventory a higher value but lowers net income.
B) inventory a lower value and also lowers net income.
C) both inventory and net income a higher value.
D) inventory a lower value and net income a higher value.

Question

Quizplus · Accepted Answer

When prices are rising, the FIFO (First In, First Out) method assigns the cost of the older, cheaper goods to the cost of goods sold, leaving the newer, more expensive goods in inventory. This results in a higher ending inventory value and, because the cost of goods sold is lower, a higher net income compared to the LIFO (Last In, First Out) method.

When Prices Are Rising, the Value of Ending Inventory Using