Answer
Generally, ending inventory would have been higher and cost of goods sold would have been lower had Ogala used the LIFO inventory method in a period of declining prices. Inventory quantities increased and LIFO associates the oldest purchase prices with inventory.
Work Step by Step
Though, in this instance, there would have been no effect on ending inventory or cost of goods sold had Ogala used the LIFO inventory method because Ogala’s inventory would have been reported at net realizable value according to the lower of cost or market rule. Net realizable value of the inventory is less than either its average cost or LIFO cost.
