UGM June 2019 Q50
0. When prices are rising, the LIFO produces
- Option : A
- Explanation : The following table compares the relative effects of using FIFO and LIFO cost assumptions on the statement of financial position and statement of income under differing economic conditions:
Changes in Price levels Relative effect on statement of financial position Relative effect on statement of income FIFO LIFO FIFO LIFO Inflation (i.e., rising prices) Higher inventory carrying value Lower inventory carrying value Lower cost of sales; higher gross profit and net income Higher cost of sales; lower gross profit and net income Deflation (i.e., falling prices Lower inventory carrying value Higher inventory carrying value Higher cost of sales; lower gross profit and net income Lower cost of sales; higher gross profit and net income
