In a period of rising prices, FIFO will have

Question

Quizplus · Accepted Answer

In a period of rising prices, FIFO (First In, First Out) accounting method will report lower cost of goods sold than LIFO (Last In, First Out) because it assumes that the oldest, and typically cheaper, inventory is sold first. This results in a higher reported net income and consequently higher income tax expense compared to LIFO, which assumes the newest, and typically more expensive, inventory is sold first, leading to a higher cost of goods sold and lower net income. Net purchases are not affected by inventory accounting methods.

In a Period of Rising Prices, FIFO Will Have