# When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 10, Problem 6MC
Textbook Problem
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## When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would?A. inflationary timesB. deflationary timesC. alwaysD. never

To determine

Concept introduction:

FIFO method:

FIFO means First in First Out. FIFO is one of the methods of Inventory recording. FIFO method assumes that the units purchased first are sold first and the valuation of the inventory and cost of goods sold is done using the same assumption.

LIFO method:

LIFO means Last in First Out. LIFO is one of the methods of Inventory recording. LIFO method assumes that the units purchased last are sold first and the valuation of the inventory and cost of goods sold is done using the same assumption.

To choose:

The situation which will result in higher inventory balance under FIFO inventory costing method than under the LIFO inventory costing method.

### Explanation of Solution

FIFO assumes latest items in the inventory; hence the inventory value shall be higher under the inflationary situation. Hence the correct option is A.

B. FIFO assumes latest items in the inventory; hence the inventory value shall be lower under the deflationary situation. Hence this option is incorrect...

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