Question

If AnsgarPharm had used FIFO to report its inventories, what would cost of goods sold have been for the year ended September 30, 2019?

a. Higher than LIFO
b. Lower than LIFO
c. Equal to LIFO
d. Not enough information to determine

Answer 1

If AnsgarPharm had used the FIFO (First-In, First-Out) method to report its inventories, the cost of goods sold for the year ended September 30, 2019, would have been lower than LIFO (Last-In, First-Out).

Step-by-step explanation:

If AnsgarPharm had used the FIFO (First-In, First-Out) method to report its inventories, the cost of goods sold for the year ended September 30, 2019, would have been lower than LIFO (Last-In, First-Out).

FIFO assumes that the first items purchased are the first items sold, thereby valuing the inventory at the older, lower-cost prices. In a period of rising costs, like inflation, FIFO results in lower costs of goods sold and higher ending inventory compared to LIFO.

Since the question does not provide specific data about cost differences between the two methods, we can only infer that the cost of goods sold would be lower than LIFO based on the general assumption of rising costs.