When Inventory Prices Are Falling, the LIFO Costing Method Will

question 38

Multiple Choice

When inventory prices are falling, the LIFO costing method will generally result in a:

• A)lower gross profit than under FIFO.
• B)higher gross profit than under FIFO.
• C)lower inventory value than under FIFO.
• D)lower owners' equity balance than under FIFO.

---

Definitions:

LIFO Method

Last In, First Out method, an inventory costing method where the last items purchased are the first ones sold.

Ending Inventory

The value of goods available for sale at the end of an accounting period, determined by a physical count or by applying the cost flow assumption.

Specific Invoice Method

A method of inventory cost calculation that identifies and uses the actual cost of each specific item sold.

High-Cost Goods

High-cost goods are items that require a considerable amount of money to purchase due to their quality, rarity, or other factors.