rising prices
falling prices
fluctuating prices
None of these
Answer is Right!
Answer is Wrong!
The correct answer is: A. rising prices.
Last in first out (LIFO) is a method of inventory accounting in which the cost of goods sold is based on the costs of the goods that were purchased last. This method is suitable in times of rising prices because it results in the lowest possible cost of goods sold, which in turn results in the highest possible net income.
The other options are incorrect because they do not describe a situation in which LIFO would be the most appropriate inventory accounting method.
- Option B, falling prices, is not a good time to use LIFO because it would result in the highest possible cost of goods sold, which in turn would result in the lowest possible net income.
- Option C, fluctuating prices, is also not a good time to use LIFO because it would result in an uneven cost of goods sold, which can make it difficult to track inventory and calculate profits.
- Option D, None of these, is incorrect because it does not provide a correct answer to the question.