In an inflationary environment:Multiple Choicea company's net income will be the same regardless of whether LIFO or FIFO is used.a company's net income will be higher if it uses LIFO than if it uses FIFO.a company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.a company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO.

Answered: In an inflationary environment:…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter2: Asset And Liability Valuation And Income Recognition

Section: Chapter Questions

Problem 3QE: Trade-Offs among Acceptable Accounting Alternatives. Firms value inventory under a variety of...

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In an inflationary environment:
Multiple Choice
a company's net income will be the same regardless of whether LIFO or FIFO is used.
a company's net income will be higher if it uses LIFO than if it uses FIFO.
a company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.
a company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO.

Expert Solution

Step 1

LIFO and FIFO are two inventory valuation methods. FIFO means first in first out method which says that inventory which is purchased first will also be sold first. LIFO means Last in first out method which says that inventory purchased last will be sold first

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