The Wheat Company has used the LIFO method for inventory valuation since the start of business 15 years ago.The current year ending inventory is $375,000.If the FIFO method of inventory had been used,the inventory would be $450,000.If Wheat Company had used the FIFO inventory method,income before income taxes would have been
A)$75,000 higher over the 15 year period.
B)$75,000 lower over the 15 year period.
C)$75,000 higher in the current year.
D)$75,000 lower in the current year.

Question

Quizplus · Accepted Answer

Using FIFO instead of LIFO would have resulted in a higher inventory value ($450,000 instead of $375,000), indicating that the cost of goods sold (COGS) would have been lower. Lower COGS would have led to higher income before taxes over the 15-year period by the difference in inventory valuation, which is $75,000.

The Wheat Company Has Used the LIFO Method for Inventory