During periods of inflation,which method will yield the smallest ending inventory and the largest cost of goods sold?
A)LIFO
B)FIFO
C)Average cost
D)Specific identification

Question

Quizplus · Accepted Answer

LIFO (Last-In-First-Out) assumes that the most recent inventory purchases are sold first, which means that during inflation, the older, cheaper inventory items will be left in the ending inventory. This results in a smaller ending inventory and a larger cost of goods sold because the more expensive inventory items are being matched with the sales revenue. Therefore, LIFO is the best choice during periods of inflation.

During Periods of Inflation,which Method Will Yield the Smallest Ending