Which of the following statements is correct when inventory unit costs are increasing?
A)LIFO's ending inventory will be the largest among the inventory costing methods.
B)FIFO's gross profit will be the lowest among the inventory costing methods.
C)Inventory turnover will be the largest when the LIFO inventory method is used.
D)Use of the LIFO method will result in lower cash flows due to an increased cost of goods solD.LIFO has the largest cost of goods sold and the lowest ending inventory and therefore the largest inventory turnover ratio.

Question

Quizplus · Accepted Answer

When inventory unit costs are increasing, LIFO will have the largest cost of goods sold and the lowest ending inventory, resulting in the largest inventory turnover ratio. Therefore, choice C is correct. Choices A and B are incorrect because LIFO will have the lowest ending inventory and FIFO's gross profit will be higher due to lower cost of goods sold. Choice D is incorrect because LIFO will result in lower income taxes and possibly higher cash flows due to the lower taxes.

Which of the Following Statements Is Correct When Inventory Unit