LIFO allows managers to manipulate net income by timing the purchases of inventory.

Question

Quizplus · Accepted Answer

LIFO (last in, first out) accounting method assumes that the last inventory purchased is the first one to be sold. This can allow managers to manipulate net income by timing the purchases of inventory. If they purchase more inventory towards the end of the year, it will result in a higher cost of goods sold and lower net income for that year. Conversely, if they delay purchases until the beginning of the next year, it will result in a lower cost of goods sold and higher net income for that year.

LIFO Allows Managers to Manipulate Net Income by Timing the Purchases