34、Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted.
During a period of declining prices, a company using the LIFO inventory method instead of FIFO would most likely report:

A. lower current assets and lower gross income.

B. lower current assets and higher gross income.

C. higher current assets and lower gross income.

D. higher current assets and higher gross income.

[此贴子已经被作者于2008-11-7 16:03:39编辑过]

Correct answer = D

"Analysis of Inventories," Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried
2008 Modular Level I, Vol. 3, pp. 305, 310
Study Session 9-35-b, c
explain the relationship among and the usefulness of inventory and cost of goods sold data provided by the LIFO, FIFO, and average cost methods when prices are (1) stable or (2) changing;
compare and contrast the effect of the different methods on cost of goods sold and inventory balances, and discuss how a company's choice of inventory accounting method affects other financial items, such as income cash flow and working capital
If prices were declining, using LIFO would match the lower (most recent) costs with current sales. Costs of goods sold would be lower with LIFO and gross profit (income) would be higher compared to using FIFO. Lower cost of goods sold means inventory balances, consisting of older, higher-priced items, would be higher using LIFO, increasing current assets relative to FIFO. 

thanks