__________ is a true statement.
A) During periods of inflation,LIFO makes the balance sheet less representative of the actual inventory values than if FIFO were used
B) During periods of inflation,FIFO makes the balance sheet less representative of actual inventory values than if LIFO were used
C) After inflation ends,distortion due to LIFO will disappear as inventory is sold
D) During periods of inflation,LIFO overstates earnings relative to FIFO
E) None of these

Question

Quizplus · Accepted Answer

The use of LIFO during periods of inflation results in higher cost of goods sold, which leads to lower reported earnings and a lower tax liability. However, it also results in an inventory value on the balance sheet that is based on older, lower prices, which can make the balance sheet less representative of the actual inventory values than if FIFO were used.

__________ Is a True Statement