During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
A) Specific identification method.
B) Average cost method.
C) Weighted-average method.
D) FIFO method.
E) LIFO method.

Question

Quizplus · Accepted Answer

LIFO (Last-in, First-out) method assumes that the last units purchased or produced are the first ones to be sold, and this results in reporting lower net income during rising costs because the old, lower-priced inventory remains on the balance sheet while the newer, higher-priced inventory is matched against revenue on the income statement.

During a Period of Steadily Rising Costs, the Inventory Valuation