Final answer:
The incorrect statement related to the LIFO method is Option (c): "LIFO is appropriate where prices tend to lag behind costs." LIFO is generally used when costs are rising or expected to rise, not when they lag behind prices.
Step-by-step explanation:
The question is related to the inventory accounting method known as Last In, First Out (LIFO). This method assumes that the last items added to inventory are sold first. When considering which statement related to the LIFO method is incorrect:
- Option (a): LIFO could be preferable if revenues have been increasing faster than costs since it would match the most recent and likely higher costs against the current revenues.
- Option (b): If LIFO has been used traditionally, businesses might prefer to continue using it to maintain consistency in their financial reports.
- Option (c): LIFO generally is not suitable when prices tend to lag behind costs, because it would not reflect the current cost of goods sold accurately.
- Option (d): LIFO is indeed not suitable in situations where specific identification of inventory items is traditional, such as in the sale of unique items like cars or real estate.
Therefore, the incorrect statement is Option (c): "LIFO is appropriate where prices tend to lag behind costs." The correct concept would be that LIFO is typically used in situations where costs are rising or are expected to rise, not lag behind prices.