In periods of rising purchase prices and increasing inventory quantities, LIFO results in a _____ than either FIFO or the weighted-average cost-flow assumption.
A)higher cost of goods sold; lower reported periodic income; lower current income taxes
B)lower cost of goods sold; lower reported periodic income; lower current income taxes
C)higher cost of goods sold; higher reported periodic income; lower current income taxes
D)higher cost of goods sold; higher reported periodic income; higher current income taxes
E)a lower cost of goods sold; higher reported periodic income; higher current income taxes

Question

Quizplus · Accepted Answer

In periods of rising purchase prices and increasing inventory quantities, using the Last In, First Out (LIFO) method results in a higher cost of goods sold because the most recently purchased (and presumably more expensive) inventory items are sold first. This leads to lower reported periodic income due to the higher cost of goods sold, which in turn results in lower current income taxes because taxable income is lower.

In Periods of Rising Purchase Prices and Increasing Inventory Quantities