If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is:
A) average cost.
B) LIFO.
C) FIFO.
D) All methods will generate the same net income.

Question

Quizplus · Accepted Answer

FIFO (First In, First Out) will yield the highest net income in a period of rising prices because the oldest, and typically lower cost, inventory is used up first, leaving the newer, higher cost inventory on the balance sheet. This results in lower cost of goods sold and higher net income compared to other methods.

If Merchandise Inventory Is Being Valued at Cost and the Price