For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither....

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For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither. **Pay special attention to whether prices are rising or declining.

business accounting

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Answer 1

Answer #1

1) LIFO:

( when inventory cost are rising, LIFO uses most recent purchases, which increases cost of good sold, and higher cost reduces profit, and that leads to lowest income tax expense.)

2) LIFO:

(As we know, LIFO uses the most recent purchases,if cost are declining, it will lead to reduced cost of good'sold, which eventually increases the gross profit.)

3) FIFO:

( FIFO, uses the , earlier purchases first., so even when cost are rising, it will uses the units purchased earlier at lower cost so its yields the lowest cost of good sold.)

4) FIFO:

( In FIFO method , ending inventories are nothing but recent purchases, so if costs are declining , fifo will yields the lowest cost of ending inventory.)

5) Neither:

(Only cost does not affect sales revenue, if sales price increase/ decreases its impacts sales. Therefore answer is neither.)

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