hard · Investment Banking

If a company uses LIFO instead of FIFO for inventory accounting during a period of rising prices, how will its financial statements differ?

1. There is no difference in Net Income as inventory is an asset, not an expense.
2. FIFO will result in higher cash taxes because it reports lower profit.
3. LIFO will result in a higher Inventory balance because the newest units are kept in stock.
4. LIFO will result in higher COGS, lower Net Income, and lower ending Inventory on the Balance Sheet.

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