Choose the statement which is correct. Assume that inventory prices are rising.
A) The LIFO method gives the lowest figure for cost of sales.
B) The FIFO method gives the lowest closing inventory figure in the balance sheet.
C) The FIFO method gives the highest closing inventory figure in the balance sheet.
D) The LIFO method gives the highest closing inventory figure in the balance sheet.

Question

Quizplus · Accepted Answer

In an inflationary period, the FIFO method (First-In, First-Out) assumes that the newest items you purchased are sold first, leaving the oldest items in inventory. This results in a higher closing inventory figure because the oldest, cheaper items are left in inventory. Therefore, option C is correct.

Choose the Statement Which Is Correct