Question

C O Not secure E connect A firm has used LIFO for several years during which costs have trended higher If this firm achieves a substan effect on 2017 net income of the inventory reduction, compared to having no change in inventory tothe end of 2017, O net income for 2017 will be greater if the inventory quantity declines O net income for 2017 will be less if the inventory quentity decines O can't tell from the information given O net income for 2017 will not be affected because of the inventory quantity decine

Answer 1

Lifo Means Last in fast out , In this method of accounting last purchased was sold first.

Trend pf the purchase of material is showing higher it means later purchase of material is at higher price .

When purchase at later and used it first it means cost of Goods sold is higher for this trend.

So when later purchase material at higher cost was used first than COST of GOODS sold will be higher and when we can used the already purchased material from the stock than the Cost of Goods Sold will be lesser and profit is more.

So, Answer = Option 1 = Net Income for 2017 will be greater if the inventory quantity declines.