When a company uses LIFO and prices are declining, profits will be higher than if the company had used FIFO.

Name: When a company uses LIFO and prices are declining, profits will be higher than if the company had used FIFO.
Brand: Quizplus
Rating: 4.8 (38 reviews)

Question

Quizplus · Accepted Answer

If prices are declining, the cost of the most recently purchased units will be less than the cost of older units. These newer units will flow to the income statement with a smaller cost than under FIFO causing profits to be higher.

When a Company Uses LIFO and Prices Are Declining, Profits