Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Question

Quizplus · Accepted Answer

LIFO (Last In, First Out) inventory valuation method primarily affects the cost of goods sold and inventory valuation on the balance sheet, rather than directly creating paper or phantom profits. It can lead to higher costs of goods sold during inflationary periods, potentially lowering taxable income, but does not inherently generate phantom profits.

Use of the LIFO Inventory Valuation Method Enables a Company