During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the ________ inventory valuation method.
A) FIFO (first-in, first-out)
B) LIFO (last-in, first-out)
C) sliding scale
D) average cost

Question

Quizplus · Accepted Answer

The cost of goods sold figure will reflect more recent, higher costs when the LIFO method is used. Subtracting this higher cost of goods sold figure from sales revenue will produce a lower gross profit.

During a Period of Rising Prices, If a Firm Desires