Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants the most realistic net income. Which inventory costing method should Ace consider using?
A)Average because all inventory costs will then represent an average amount.
B)Specific identification is the most realistic method because it involves the actual costs.
C)LIFO because cost of goods sold represents the latest costs.
D)FIFO because cost of goods sold represents the earliest costs.

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) is the most realistic method during inflation because it matches the most recent inventory costs with current revenues, providing a more accurate reflection of net income.

Ace Company Is a Retailer Operating in an Industry That