In times of inflation,which cost flow assumption provides the highest inventory asset?

Question

Quizplus · Accepted Answer

In times of inflation, the cost of goods sold will be higher due to rising prices, resulting in lower taxable income. Choosing FIFO (First In First Out) ensures that inventory costs reflect current prices, increasing the value of the inventory asset on the balance sheet. This is because the first items purchased (which are cheaper) are sold first, leaving the higher-priced items in inventory, meaning the cost of goods sold will be lower, and the ending inventory asset will be higher.

In Times of Inflation,which Cost Flow Assumption Provides the Highest