Final answer:
When prices are falling, LIFO will result in lower income and a lower inventory valuation than will FIFO.
Step-by-step explanation:
When prices are falling, LIFO (Last-In, First-Out) will result in lower income and a lower inventory valuation than will FIFO (First-In, First-Out).
LIFO assumes that the most recent inventory items are sold first, which means that the cost of goods sold (COGS) will be based on the higher costs of the more recently purchased inventory items. As prices are falling, this will result in a higher COGS and therefore lower income.
In addition, LIFO will result in a lower inventory valuation because the inventory on the balance sheet will be based on the older, lower-cost inventory items that are still in stock.