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JAMB Principles of Accounts 2011 Question 17

Question 17

Stock Valuation

In a period of declining price, which of the following methods would result in higher profit?

  1. A.FIFO
  2. B.Simple average
  3. C.LIFO
  4. D.Weighted average.
Show the answer and explanation

Answer: C (LIFO)

Explanation

LIFO charges the latest (cheaper) prices to cost of sales when prices are falling, so cost of sales is lowest and profit highest.