Which of the following inventory methods would likely result in the lowest ending inventory during a period of rising prices?

• A. FIFO under the periodic inventory system
• B. LIFO under the periodic inventory system
• C. FIFO under the perpetual inventory system
• D. Weighted average under the periodic inventory system

Answer: (B)

Verified step by step guidance

1. Understand the key inventory methods: FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Weighted Average. Each method determines how inventory costs are assigned to Cost of Goods Sold (COGS) and ending inventory.
2. Recognize the impact of rising prices on inventory valuation. In a period of rising prices, newer inventory costs are higher than older inventory costs.
3. Analyze the LIFO method under the periodic inventory system. LIFO assumes that the most recent (higher-cost) inventory is sold first, leaving older (lower-cost) inventory as ending inventory. This results in the lowest ending inventory value during rising prices.
4. Compare LIFO to FIFO under the periodic inventory system. FIFO assumes that the oldest (lower-cost) inventory is sold first, leaving newer (higher-cost) inventory as ending inventory, which results in a higher ending inventory value compared to LIFO.
5. Evaluate Weighted Average under the periodic inventory system. This method averages all inventory costs, resulting in an ending inventory value that is typically between the values produced by FIFO and LIFO during rising prices.