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in a period of rising prices, which of the following inventory methods results in the lowest...

in a period of rising prices, which of the following inventory methods results in the lowest net income?

1. Specific identification method

2. FIFO

3. LIFO

4. Weighted average cost

Explain the answer in detail.

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Answer #1

Ans:

During a time of rising prices, LIFO inventory method might be expected to give the Lowest net income.

Reason: LIFO (Last in first out) Means the inventory purchases In Last i.e Recent purchases must be sold first. So The inventory sold most recently is out of Recent purchased inventory which was bought with high price . Hence, the cost of goods sold would be More which would decrease gross profit and also the net income.

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