Multiple choice

Directions: Choose the correct option for the given question:

LIFO method is suitable in times of

  1. rising price

  2. falling price

  3. either (1) or (2)

  4. both (1) and (2)

  5. none of these
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A Correct answer
Explanation

The Last-In, First-Out (LIFO) method assumes the most recently purchased items are sold first. In times of rising prices, this matches the most recent (higher) costs against revenue, which can reduce tax liability.

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