Detailed Answer
(c) During periods of rising prices, the inventory costing
methods which will give Jones the lowest ending inventory balance are LIFO methods, because inventory items that were purchased
at the earliest date (when prices were lower) will remain in inventory
and the most recently purchased and more expensive items
will be expensed through cost of goods sold. Any FIFO method
will produce a higher ending inventory balance during inflation
since the items purchased earliest (at lower prices) will be expensed
through CGS, while the more expensive items remain in
inventory. Answers (a) and (b) are incorrect because neither will
give Jones a lower ending inventory balance than dollar-value
LIFO, particularly as Jones’ inventory changes (because dollarvalue
LIFO allows the LIFO “layers” to be made up of similar, not
necessarily identical, items).