Comparing inventory methods

Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results.

1. In each of the below, select the less than, greater than, or equal sign for each comparison, assuming periods of rising prices.

a. FIFO ending inventory LIFO ending 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?

In periods of rising prices, the net income shown on the companys tax return would be lower under than under ; thus, there is a tax advantage of using .