Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period then the company using
A) LIFO will have the highest ending inventory.
B) FIFO will have the highest cost of good sold.
C) FIFO will have the highest ending inventory.
D) LIFO will have the lowest cost of goods sold.

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) assumes that the oldest items are sold first, so if prices have increased, the items remaining in inventory (ending inventory) would be those most recently purchased at higher prices, resulting in a higher ending inventory value compared to LIFO (Last-In, First-Out).

Two Companies Report the Same Cost of Goods Available for Sale