In case of rising prices (inflation), LIFO will:

A. provide lowest value of closing stock and profit

B. provide highest value of closing stock and profit

C. provide highest value of closing stock but lowest value of profit

D. provide highest value of profit but lowest value of closing stock

Answer: Option A

Solution(By Examveda Team)

In case of rising prices (inflation), LIFO will provide lowest value of closing stock and profit. Since LIFO (last-in, first out) is moving the recent/higher costs to the cost of goods sold, the older/lower costs remain in inventory. The higher cost of goods sold generally results in smaller amounts of gross profit, net income taxable income, income tax payments, and certain financial ratios.