During inflationary periods, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO method of costing inventory.

Question

Quizplus · Accepted Answer

During inflationary periods, the FIFO (First In, First Out) method assigns the older, lower-cost items to cost of goods sold, resulting in a lower cost of goods sold and a higher gross margin compared to the LIFO (Last In, First Out) method, which assigns the newer, higher-cost items to cost of goods sold. This leads to a greater amount of net income under FIFO during inflation.

During Inflationary Periods, the Use of the FIFO Method of Costing