Inventory: first in, first out (FIFO); last in, first out (LIFO)
Assuming a deflationary environment (prices are falling), which of the following combinations will result in the highest net income in year 1? A. DDB; FIFO. B. Straight-line; LIFO. C. Straight-line; FIFO.
For year 1, straight-line depreciation will be lower than DDB. During deflationary periods, LIFO will result in lower cost of goods sold and hence higher income.
