Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?
A)Average-cost 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 the cost of goods sold represents the latest costs.
D)FIFO because the cost of goods sold represents the earliest costs.

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) is the most realistic method during inflation as it matches the most recent inventory costs with current revenues, reflecting the latest market conditions in the cost of goods sold.

Ace Company Is a Retailer Operating in an Industry That