C is corrent. The requirement is to determine the correct statement regarding the LIFO method (as compared to the FIFO method) during a period when prices are rising. LIFO (last-in, first out) benefits a taxpayer in periods of rising prices because recently incurred high costs flow through cost of goods sold while previously incurred low costs remain in ending inventory. Compared to FIFO, LIFO increases the cost of goods sold and decreases ending inventory, thereby decreasing gross profit, taxable income, and current tax liability.
A is incorrect because current tax liability is lower and cost of goods sold is higher.
B is incorrect because current tax liability is lower and cost of goods sold is higher.
D is incorrect because current tax liability is lower and cost of goods sold is higher.
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