The LIFO method cushions the impact of rising or falling prices by matching current costs against current revenues.

Question

Quizplus · Accepted Answer

The LIFO (Last-In, First-Out) method assumes that the last items added to inventory are the first items sold, which means that the cost of goods sold reflects the most recent prices. This results in higher costs of goods sold and lower net income during times of rising prices, but it also means that current costs are being matched against current revenues. Therefore, the statement is true.

The LIFO Method Cushions the Impact of Rising or Falling