When prices are rising, valuing ending inventory using the FIFO method rather than LIFO gives:
A) inventory a higher value but lowers net income.
B) inventory a lower value and also lowers net income.
C) both inventory and net income a higher value.
D) inventory a lower value and net income a higher value.

Question

Quizplus · Accepted Answer

Under FIFO (First-In, First-Out), the oldest costs are assigned to the cost of goods sold, leaving the newer, higher costs in ending inventory. This results in a higher ending inventory value and higher net income when prices are rising.

When Prices Are Rising, Valuing Ending Inventory Using the FIFO