Question

Under inflationary conditions, which of the following methods will have highest value of closing stock ?

• A. FIFO
• B. LIFO
• C. Weighted Average
• D. None of the above

Answer 1

Answer: (A)

FIFO

The LIFO method results in less net income because COGS is greater. FIFO gives us a good indication of ending inventory value, but it also increases net income because inventory that might be several years old is used to value COGS.