Question

At the end of January of the current year, the records of NewRidge Company showed the following for a particular item that sold at $ 16 per unit:
Required:
(b) Of FIFO and LIFO, which method results in the higher pretax income? Which method results in the higher EPS?

Answer 1

FIFO will result in higher pretax income and EPS.

FIFO ("first in, first out") is based on these production costs, assuming that the oldest products in a company's inventory are sold first. The LIFO (last in, first out) method assumes that the newest product in the company's inventory was sold first, and uses that cost instead.

FIFO (First In, First Out) Inventory Management evaluates inventory to reduce the likelihood of business losses when products are phased out or discontinued. LIFO (last in, first out) inventory management is suitable for non-perishable goods and uses the current price to calculate the cost of goods sold.

Learn more about FIFO at

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