Response to the following problem:
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.
a. FIFO inventory LIFO inventory
b. FIFO cost of goods sold LIFO cost of goods sold
c. FIFO net income LIFO net income
d. FIFO income tax LIFO income tax
2. Why would management prefer to use LIFO over FIFO in periods of rising prices?