🎓CFA Final Prep All Topics

FIFO, LIFO, and Weighted Average Effect

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Question

Under rising prices, which inventory method reports the highest ending inventory?

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Answer

FIFO.

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Question

What is the trade-off between FIFO and LIFO under inflation?

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Answer

FIFO improves balance sheet realism; LIFO improves income statement realism.

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Question

Under rising prices, which inventory method reports the highest COGS?

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Answer

LIFO.

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