1. A firm is assumed to use perpetual system which separately determined inventory under FIFO and LIFO and then compare the results.

i) In each space below, place the correct sign (< / > / =) for each comparison by assuming periods of rising prices.

a. FIFO supplies ____________ LIFO supplies

b. FIFO cost of sales ____________ LIFO cost of sales

c. FIFO net profit ____________ LIFO net profit

d. FIFO taxable income ____________ LIFO taxable income

ii) Why the use of LIFO is more preferable by a management compared to FIFO in period of rising prices?

(5)

(Total: 15 marks)