What is LIFO Inventory Value?

What is LIFO Inventory Value?

• A. First In First Out - oldest items sold first.
• B. Last In Last Out - most recently acquired are sold first. Ending inventory consists of older inventory prices.
• C. Average cost method.
• D. Specific identification method.

Answer: (B)

LIFO means the latest purchases are sold first, so the ending inventory is made up of the oldest costs on hand. Under this method, the cost of goods sold reflects the most recent, higher prices if prices are rising, while the ending inventory value tends to be lower because it’s based on older, often lower costs. This is why the ending inventory is valued using older prices when applying LIFO. Other methods are different conventions: First In First Out would leave newer costs in ending inventory because the oldest items are sold first; the average cost method uses a weighted average of all costs to value both COGS and ending inventory; specific identification tracks the exact cost of each item.

LIFO means the latest purchases are sold first, so the ending inventory is made up of the oldest costs on hand. Under this method, the cost of goods sold reflects the most recent, higher prices if prices are rising, while the ending inventory value tends to be lower because it’s based on older, often lower costs. This is why the ending inventory is valued using older prices when applying LIFO.

Other methods are different conventions: First In First Out would leave newer costs in ending inventory because the oldest items are sold first; the average cost method uses a weighted average of all costs to value both COGS and ending inventory; specific identification tracks the exact cost of each item.