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Assuming purchase costs are declining, determine which statements below correctly describe what

happens to cost of goods sold under FIFO, LIFO and weighted average cost flow methods.

Companies using FIFO will report the smallest cost of goods sold $($compared to com$-$

panies using LIFO or weighted average.$)$

In a situation where prices are declining, companies using LIFO will report the smallest

cost of goods sold.

Companies using LIFO will pay higher taxes than companies using FIFO, assuming all

else being equal.

Companies using FIFO will report the highest gross profit and net income.

Weighted average cost of goods sold will be between FIFO and LIFO costs of goods

sold.

Companies using LIFO will report the highest ending inventory on their balance sheets

$($as compared to companies using FIFO or weighted average,$)$