During inflation, the best method to use in inventory valuation that produces the smallest amount of profit is:
A)LIFO
B)FIFO
C)Specific invoice
D)Weighted average
E)None of these

Question

Quizplus · Accepted Answer

During inflation, the cost of inventory usually increases. Therefore, the last-in, first-out (LIFO) method assumes that the most recent inventory purchased is sold first, resulting in higher costs of goods sold (COGS) and lower net income/profit. Thus, LIFO is the best choice in inventory valuation that produces the smallest amount of profit during inflation.

During Inflation, the Best Method to Use in Inventory Valuation