CFA Practice Question

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CFA Practice Question

Which of the following results from using the LIFO method of inventory cost flows during a period of inflation?

A. Understated cost of goods sold
B. Overvalued inventory
C. Currently valued cost of goods sold
D. Currently valued inventory
Correct Answer: C

LIFO matches current costs with current revenues. During a period of inflation, LIFO results in currently valued cost of goods sold.

User Contributed Comments 3

User Comment
stranger a. COGS is overstated since we are valuing COGS at the current higher prices. b. inventory would be undervalued since it is valued at the first in costs. c. COGS ARE CURRENTLY VALUED (CURRENT PRICES) d. inventory is valued at first in costs.
chicyvan nice explaination. Thank you
cwest020 Stranger is incorrect on A. COGS is not overstated, it is valued at current prices. Hence the correct answer of C.
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