Question

LIFO uses the _________ unit costs for Cost of Goods Sold on the income statement and the __________ unit costs for inventory on the balance sheet.

1) newest; oldest
2) oldest; newest
3) newest; newest
4) oldest; oldest

Answer 1

LIFO refers to Last-In, First-Out, and it applies the newest unit costs to Cost of Goods Sold and the oldest unit costs to inventory on the balance sheet, which corresponds to choice 1) newest; oldest.

Step-by-step explanation:

LIFO, which stands for Last-In, First-Out, is an inventory valuation method. In this method, the newest unit costs are used for Cost of Goods Sold (COGS) on the income statement, and the oldest unit costs are recorded for inventory on the balance sheet. Therefore, the correct answer to the question is: LIFO uses the newest unit costs for Cost of Goods Sold on the income statement and the oldest unit costs for inventory on the balance sheet. This is choice 1) newest; oldest.