In a period of falling prices, the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

Question

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In a period of falling prices, the LIFO (Last In, First Out) method of inventory valuation typically results in a higher reported net income than the FIFO (First In, First Out) method, because the cost of goods sold under LIFO will be lower due to the more recent, lower-priced inventory being sold first.

In a Period of Falling Prices, the LIFO Method of Inventory