Question

Assuming no beginning inventory, what can be said about the trend of inventory prices, when gross profit using LIFO inventory method exceeds gross profit using the FIFO inventory method?

Price trend cannot be determined from information given.

Prices decreased.

Prices increased.

Prices remain unchanged.

Answer 1

Correct Answer: Price Decreased.

Explanation:

If the Gross profit in LIFO inventory is more than FIFO inventory, it means than Cost of goods sold in FIFO inventory is more than LIFO inventory, cost of goods sold in LIFO inventory can only be less than FIFO inventory when the prices

Of the goods decreased.

End of Answer.

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