If inventory prices for a company are decreasing and inventory quantities for the same company are increasing, the inventory accounting methods that result in the most informative income statement and the inventory balance sheet amount closest to economic value, respectively, are: Inventory balance sheet amount Most informative income statement Closest to economic value A. FIFO FIFO B. FIFO LIFO C. LIFO FIFO D. LIFO LIFO
I am a bit affraid to get this wrong, but I think C. Lifo is always best for GOCS. (inc. statement) FIFo is always best for inventory (balance sheet)
Yeah, you are right, the ans is C It seems rising or decreasing price has no impac at all.
This was discussed before. COGS --> LIFO --> Income statement. Inventory Balance --> FIFO --> Balance Sheet The rising, falling prices, stationery / stable inventory quantities are plain distractors. The reasoning is: When you use LIFO – your COGS - reflects the latest Cost of inventory purchased. When you use FIFO for Ending Inventory --> your latest cost is reflected on the Ending inventory. CP