Which of the following is true? The choice of LIFO versus FIFO will:
A)not affect net income or cash flow from operations.
B)not affect net income but will affect cash flow from operations.
C)affect both net income and cash flow from operations.
D)affect net income but will not affect cash flow from operations.

Question

Quizplus · Accepted Answer

The choice of LIFO versus FIFO affects both net income and cash flow from operations. LIFO (Last In First Out) assumes that the last items purchased or produced are the first ones sold, which can lead to higher cost of goods sold and lower net income. However, it may also result in lower inventory values and lower taxes. FIFO (First In First Out) assumes that the first items purchased or produced are the first ones sold, which can result in lower cost of goods sold and higher net income. However, it may also result in higher inventory values and higher taxes. Both methods can impact the cash flow from operations as changes in inventory levels affect the amount of cash used or provided by operations.

Which of the Following Is True? the Choice of LIFO