provide lowest value of closing stock and profit
provide highest value of closing stock and profit
provide highest value of closing stock but lowest value of profit
provide highest value of profit but lowest value of closing stock
Answer is Right!
Answer is Wrong!
The correct answer is: C. provide highest value of closing stock but lowest value of profit
In case of rising prices (inflation), LIFO will provide the highest value of closing stock but the lowest value of profit. This is because LIFO stands for Last In, First Out. This means that the last items that were purchased are the first items that are sold. In a period of rising prices, this means that the cost of goods sold will be based on the higher prices of the most recent purchases. This will result in a lower profit margin.
The other options are incorrect for the following reasons:
- Option A is incorrect because LIFO will provide the highest value of closing stock, not the lowest value.
- Option B is incorrect because LIFO will provide the lowest value of profit, not the highest value.
- Option D is incorrect because LIFO will provide the highest value of closing stock, not the lowest value.
I hope this explanation is helpful. Please let me know if you have any other questions.