Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results.
1. In each space below, place the correct sign [less than (<), greater than (>), or equal (=)] for each comparison, assuming periods of rising prices.
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a. FIFO inventory
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__________
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LIFO inventory
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b. FIFO cost of goods sold
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__________
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LIFO cost of goods sold
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c. FIFO net income
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__________
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LIFO net income
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d. FIFO income tax
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__________
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LIFO income tax
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2. Why would management prefer to use LIFO over FIFO in periods of rising prices?