During times of rising prices, which of the following is not an accurate statement?
A) Average costing will yield results that are between those of FIFO and LIFO.
B) LIFO will result in a higher cost of merchandise sold than FIFO.
C) FIFO will result in a higher net income than LIFO.
D) LIFO will result in higher income taxes than FIFO.

Question

Quizplus · Accepted Answer

During times of rising prices, LIFO (Last In, First Out) results in a higher cost of goods sold because the most recently acquired (and presumably more expensive) inventory is sold first. This leads to lower net income compared to FIFO (First In, First Out). Consequently, LIFO would result in lower income taxes than FIFO, not higher, because businesses are taxed on their net income.

During Times of Rising Prices, Which of the Following Is