During a period of rising prices,LIFO results in a lower income tax expense than does FIFO.

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased or produced items are the first to be sold or used, resulting in the highest cost of goods sold and lowest taxable income during inflationary periods. This means that LIFO method will result in a lower income tax expense than the FIFO (First-In, First-Out) method, which assumes that the oldest items are sold first, resulting in a lower cost of goods sold and higher taxable income during inflationary periods. Therefore, the statement is true.

During a Period of Rising Prices,LIFO Results in a Lower