Help with Accounting Problem Please?

Question

Indicate whether FIFO or LIFO is being described.

1. Preferable method for conforming to matching principle.

2. Preferable method for tax purposes under rising prices

3. Results in more up-to-date ending inventory figure.

4. Results in fictitious profits under rising prices.

5. Produces higher income when prices are declining.

6. Produces higher ending inventory when prices are rising.

Answer 1

1. FIFO - the units remaining in inventory are the most recent, and their cost is more current.

2. LIFO - When prices are rising, you're deducting the newest purchases in COGS, which gives you a higher deduction.

3.  FIFO - You know that the ten widgets you have left at the end of the year really aren't the first ten you ever bought.  ;)

4.  FIFO - You'll have a higher inventory value in a time of rising prices than in LIFO, so you'll look like you have more profit.

5.  LIFO - the opposite of #4 and #2

6.  FIFO - see #4

Answer 2

1. lifo

2. lifo

3. fifo

4. fifo

5. lifo

6. fifo

Answer 3

1. FIFO

2. LIFO

3. FIFO

4. FIFO

5. LIFO

6. FIFO