Final answer:
During a period of falling prices, the Last-In, First-Out (LIFO) inventory method typically results in the lowest balance sheet value for inventory, as it assumes that newer inventory is sold first, leaving older, higher-cost inventory in stock.Option B is correct answer.
Step-by-step explanation:
The question relates to how different inventory valuation methods affect the balance sheet in a period of falling prices. In such a period, the Last-In, First-Out (LIFO) inventory method generally results in the lowest inventory valuation on the balance sheet. This is because LIFO assumes that the most recently acquired inventory is sold first, leaving the older, and in a period of falling prices, higher-cost inventory in stock. Consequently, this older inventory is valued at the previously higher prices, which when prices are falling, will be more than the current market value.
Contrastingly, the Average Cost method smooths out the effects of price changes over time by averaging the cost of all inventory items, resulting in a moderate inventory value on the balance sheet. It doesn't provide the lowest valuation during falling prices, as it considers all inventory costs rather than only the most recent ones.
As for the typos and potential confusion in the options provided (with 'LIFO method' appearing twice), the intent of the question is clear: to identify which method typically leads to a lower inventory value on the balance sheet during a deflationary period. Based on this explanation, the LIFO method would typically yield the lowest balance sheet amount for inventory in a scenario of falling prices.