Question

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period then the company using:______
a. LIFO will have the highest ending inventory
b. FIFO will have the highest cost of good sold
c. FIFO will have the highest ending inventory
d. LIFO will have the lowest cost of goods sold

Answer 1

Answer:

c. FIFO will have the highest ending inventory

Explanation:

FIFO means first in, first out. it means it is the first purchased inventory that is the first to be sold.

LIFO means last in first out. it means that it is the last purchased inventory that is the first to be sold.

If FIFO inventory method is used, the first purchased inventory is the first to be sold and price increased during the period, the beginning inventory would be lower and the ending inventory would be higher when compared to a company using LIFO