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In a period of steadily rising prices (meaning the cost to purchase inventory is increasing over time), what would be the implications of choosing FIFO vs. LIFO

Respuesta :

akiran007

Answer:

So choosing FIFO would yield the highest profit and net income.

Explanation:

When the purchase price is continuously rising the

  • FIFO assigns the lowest amount to cost of goods sold- yielding the highest gross profit and net income.
  • LIFO assigns the highest amount to the cost of goods sold -yielding the lowest gross profit and net income.

So choosing FIFO would yield the highest profit and net income.

FIFO assigns an amount to inventory closely approximating current replacement cost. First in First out charges costs to items old assuming that the earliest units purchased are first units sold.