When input prices are increasing,companies that use the LIFO method of accounting for inventory will report:
A) Lower cost of goods sold amounts in comparison to the FIFO method
B) Higher sales amounts in comparison to the FIFO method
C) Higher ending inventory amounts in comparison to the FIFO method
D) Lower gross profit margins in comparison to the FIFO method

Question

Quizplus · Accepted Answer

Under LIFO, the most recent, higher-priced inventory is used up first, leading to higher cost of goods sold and thus lower gross profit margins compared to FIFO, which uses older, lower-priced inventory.

When Input Prices Are Increasing,companies That Use the LIFO Method