When inventory prices are rising,the ending inventory balance reported on a LIFO basis is generally
A)lower than on a FIFO basis.
B)equal to a FIFO basis.
C)greater than on a FIFO basis.
D)equal to a weighted-average basis.
E)greater than a weighted-average basis.

Question

Quizplus · Accepted Answer

LIFO (last-in, first-out) assumes that the most recently acquired inventory is sold first, which means that the cost of goods sold (COGS) will reflect the higher prices of inventory purchased earlier. As prices rise, the newer inventory is more expensive, leading to a higher COGS and a lower ending inventory balance on a LIFO basis compared to a FIFO (first-in, first-out) basis. Therefore, the answer is A, lower than on a FIFO basis.

When Inventory Prices Are Rising,the Ending Inventory Balance Reported on a LIFO