Question

During times of rising prices, which of the following is not an accurate statement?a. Average costing will yield results that are between those of FIFO and LIFO.b. LIFO will result in a higher cost of goods sold than FIFO.c. FIFO will result in a higher net income than LIFO.d. LIFO will result in higher income taxes than FIFO.

Answer 1

Answer:d. LIFO will result in higher income taxes than FIFO

Explanation:

A period of rising prices means price will be higher on the latter goods than the former, inventory sold on Last in first out method (LIFO) will be costlier in this period than inventory sold on First in First out ( FIFO) this invariably means LIFO will result in lower net income due to high cost of inventory compared to FIFO and the lower the net income the lower the income tax this invariably means LIFO will result in lower income tax.

Average costing will yield result that are between those of LIFO and FIFO since it can an average of two price with one LIFO and the other on FIFO, LIFO will result in higher cost of goods sold since the latter goods will be costlier, FIFO will result in higher net income since the goods will be cheaper than LIFO.