Under the FIFO cost flow assumption during a period of rising costs,which of the following is false?
A)Income tax expense will be higher under FIFO than under LIFO.
B)Net income will be higher under FIFO than under LIFO.
C)Ending inventory will be lower under FIFO than under LIFO.
D)Cost of goods sold will be lower under FIFO than under LIFO.

Question

Quizplus · Accepted Answer

Under the FIFO method, the first units purchased are assumed to be sold first. This means that the cost of goods sold is based on the cost of the oldest inventory, leading to lower cost of goods sold and higher net income. However, this also means that ending inventory will be based on the cost of the more recent inventory, which will be higher. Therefore, choice C is false. A, B, and D are all true statements.

Under the FIFO Cost Flow Assumption During a Period of Rising