Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results.
1. In each space below, place the correct sign [less than (<), greater than (>), or equal (=)] for each comparison, assuming periods of rising prices.
a. FIFO inventory _________ LIFO inventory
b. FIFO cost of goods sold ________ LIFO cost of goods sold
c. FIFO net income _________ LIFO net income
d. FIFO income tax ___________ LIFO income tax
2. Why would management prefer to use LIFO over FIFO in periods of rising prices?