If a company values its stock in the period of rising prices using LIFO method; there is a tendency for it to?

A. have a higher cost of goods sold
B. have a higher gross profit
C. pay higher gross profit
D. have a higher value for closing stock

Correct Answer:

Option A – have a higher cost of goods sold

Explanation

During periods of inflation (rise in prices), the use of LIFO will result in the highest estimate of cost of goods sold among the three approaches, and the lowest net income.