Asked by flora Verdura on May 13, 2024
Verified
During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.
LIFO
"Last In, First Out," an inventory valuation method where the last items purchased are the first ones sold.
Inventory Profits
The increase in inventory value above its cost, typically due to price increases or valuation adjustments.
- Examine the effects of different inventory costing method selections on financial reports.
Verified Answer
RC
Robert CabreraMay 15, 2024
Final Answer :
False
Explanation :
During periods of rapidly rising costs, the use of the LIFO (Last In, First Out) method results in higher cost of goods sold and lower ending inventory values, which can lead to lower reported profits, not illusory or inventory profits. This is because the most recent, higher-cost inventory items are considered sold first.
Learning Objectives
- Examine the effects of different inventory costing method selections on financial reports.
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