In periods of rising prices, which is an advantage of using the LIFO inventory costing method?

A. Net income will be the highest and thus reflect the prosperity of the company.
B. Cost of goods sold will include latest (most recent) costs and thus will be more realistic.
C. Ending inventory will include latest (most recent) costs and thus be more realistic.
D. Phantom profits are reported

Question

06-12-2022
Business

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In periods of rising prices, which is an advantage of using the LIFO inventory costing method?

A. Net income will be the highest and thus reflect the prosperity of the company.
B. Cost of goods sold will include latest (most recent) costs and thus will be more realistic.
C. Ending inventory will include latest (most recent) costs and thus be more realistic.
D. Phantom profits are reported

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kumarkrishna kumarkrishna · Answer 1 · 2022-12-13T04:43:47-05:00

Correct Answer is C. Ending LIFO inventory will include latest (most recent) costs and thus be more realistic.

LIFO inventory write-downs to market because it makes it less likely for future price declines to have an impact on a company's net profits. Since the most recent inventory purchased at the highest price is sold first, companies adopting the LIFO approach typically do not have much inventory at the current higher prices. Last in, first out, or LIFO. It implies that the inventory that was most recently purchased is the one that sells first. When LIFO is in operation, the cost of goods sold would consist of the items that were most recently bought, reflecting the cost at the time. Ending inventory would consist of items that were previously purchased.

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