In times of rising prices for inventory,which of the following is true?
A) LIFO adopters would report higher cost of goods sold and lower ending inventory than FIFO adopters.
B) FIFO adopters would report higher profits and lower ending inventory than LIFO adopters.
C) LIFO adopters would report higher profits and higher ending inventory than FIFO adopters.
D) FIFO adopters would report higher cost of goods sold and higher ending inventory than LIFO adopters.

Question

Quizplus · Accepted Answer

LIFO adopters would report higher cost of goods sold and lower ending inventory than FIFO adopters in times of rising prices for inventory. This is because LIFO assumes that the most recent inventory purchases are sold first, which means that the cost of goods sold is calculated based on the prices of the most recent inventory purchases. In times of rising prices, this leads to higher cost of goods sold and lower ending inventory for LIFO adopters. On the other hand, FIFO assumes that the oldest inventory purchases are sold first, which means that the cost of goods sold is calculated based on the prices of earlier inventory purchases. In times of rising prices, this leads to lower cost of goods sold and higher ending inventory for FIFO adopters.

In Times of Rising Prices for Inventory,which of the Following