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JAMB Principles of Accounts 2010 Question 20

Question 20

Stock Valuation

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

  1. A.have a higher cost of goods sold
  2. B.have a higher gross profit
  3. C.pay higher income tax
  4. D.have a higher value for closing stock.
Show the answer and explanation

Answer: A (have a higher cost of goods sold)

Explanation

LIFO issues the most recent (dearest) goods first, so when prices are rising cost of goods sold is higher.