When prices are rising, net income calculated by using the first-in, first-out method is smaller than the amount determined from using either the last-in, first-out or the weighted-average method.

Question

Quizplus · Accepted Answer

When prices are rising, the first-in, first-out (FIFO) method results in higher net income compared to the last-in, first-out (LIFO) or weighted-average methods because older, cheaper inventory costs are matched against current revenues.

When Prices Are Rising, Net Income Calculated by Using the First-In