Question

Collins Machinery has used LIFO inventory valuation for the past 10 years. Over those 10 years, the prices of inventory have continued to increase. This would result in ________ reserve.a. Increasing the LIFOb. Decreasing the LIFOc. Increasing the FIFOd. Decreasing the FIFO

Answer 1

Answer:

A. Increasing the LIFO

Explanation:

The answer is A because since the prices have continued to increase the LIFO method means last in first out which would mean that the higher costing inventory bought recently would be used first compared to the ones bought before which were cheaper.

Therefore, the LIFO inventory would have an increasingly lower value which would lead to an increase in the reserve.