Taylor Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices. What would be the effect of this change on ending inventory in the year of the change?
A) increased ending inventory
B) decreased ending inventory
C) no change in ending inventory
D) cannot be determined from the information given

Question

Quizplus · Accepted Answer

In a period of rising prices, changing the inventory cost flow assumption from FIFO (First-In, First-Out) to LIFO (Last-In, First-Out) typically results in a lower ending inventory value. This is because under LIFO, the most recently acquired (and presumably more expensive) items are considered sold first, leaving the older (and cheaper) items in inventory.

Taylor Company Changed Its Inventory Cost Flow Assumption from FIFO