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Question
Which of the following methods or inventory valuation results in lower valuation of inventory and low income when Inflation is on the rise?
Which of the following methods or inventory valuation results in lower valuation of inventory and low income when Inflation is on the rise?
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Solution
The correct option is A LIFO
During times of rising prices, companies may find it beneficial to use LIFO cost accounting over FIFO. Under LIFO, whenever prices are rising, firms can save on taxes as well as better match their revenues to their latest costs.
During times of rising prices, companies may find it beneficial to use LIFO cost accounting over FIFO. Under LIFO, whenever prices are rising, firms can save on taxes as well as better match their revenues to their latest costs.
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