In periods of rising prices, what will LIFO produce?
Understand the Problem
The question is asking how the Last In, First Out (LIFO) inventory valuation method affects the profits reported by a company during periods of rising prices. It implies an understanding of inventory accounting methods and their impact on financial statements.
Answer
lower net income than FIFO
In periods of rising prices, LIFO will produce lower net income than FIFO.
Answer for screen readers
In periods of rising prices, LIFO will produce lower net income than FIFO.
More Information
Under LIFO, the cost of goods sold is higher during periods of rising prices, which reduces net income and, consequently, can also reduce income taxes.
Sources
- In periods of rising prices, what will LIFO produce? - homework.study.com
- FIFO vs. LIFO Inventory Valuation - investopedia.com
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