LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Question

Quizplus · Accepted Answer

LIFO (Last In, First Out) results in the most recent, higher-cost items being expensed first, leading to lower reported income in periods of rising costs, which is contrary to the goal of reporting higher income for incentives.

LIFO Is Preferred When Purchase Costs Are Rising and Managers