Which of the inventory cost flow assumptions provides the best measure of earnings,where "best" means most appropriate for predicting future earnings,when prices have been declining?

Question

Quizplus · Accepted Answer

LIFO assumes that the latest prices paid are the first ones to be expensed, leading to lower net income and taxes in a period of rising prices, but higher earnings in a period of declining prices. Therefore, when prices are declining, LIFO provides the best measure of earnings as it allocates the lowest cost to inventory sold, resulting in higher gross profit and net income, which is more appropriate for predicting future earnings.

Which of the Inventory Cost Flow Assumptions Provides the Best