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      Question

      If a company uses LIFO inventory method in falling price

      environment (prices decreasing), then:
      A Cost of goods sold will be low, profits high Correct Answer Incorrect Answer
      B COGS will be high, profits low Correct Answer Incorrect Answer
      C Ending inventory will reflect newer lower prices Correct Answer Incorrect Answer
      D Both A and C Correct Answer Incorrect Answer
      E Both B and C Correct Answer Incorrect Answer

      Solution

      Under LIFO when prices fall, last in are cheaper → COGS lower → higher profits; ending inventory higher (older higher cost). Note C is wrong here.

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