In an inflationary environment, which inventory cost flow method, FIFO or LIFO, reports the lowest amount of net income?
What will be an ideal response?
LIFO
The first-in, first-out (FIFO) cost flow method requires that the cost of the items purchased first be assigned to cost of goods sold. The last-in, first-out (LIFO) cost flow method requires that the cost of the items purchased last be charged to cost of goods sold. In an inflationary environment, LIFO will produce a higher cost of goods sold, so it will result in the lowest net income and the smallest balance in ending inventory.
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The fund classification system used by public schools follows the GASB standards.
Answer the following statement true (T) or false (F)
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