In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?

A) FIFO
B) LIFO
C) Average Cost
D) Income tax expense for the period will be the same under all assumptions.

Question

Roshanak Gholamzadeh · Accepted Answer

Final Answer : B, Explanation :  LIFO assumes that the most recently purchased inventory is sold first, resulting in the lowest value inventory remaining on hand, which in turn results in higher cost of goods sold and lower taxable income. This is especially beneficial during a period of increasing prices, where the cost of goods sold is highest under FIFO and lowest under LIFO.

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?

A) FIFO
B) LIFO
C) Average Cost
D) Income tax expense for the period will be the same under all assumptions.

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Learning Objectives

Related questions

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?A) FIFOB) LIFOC) Average CostD) Income tax expense for the period will be the same under all assumptions.

Definitions

Learning Objectives

Learning Objectives

Related questions

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?

A) FIFO
B) LIFO
C) Average Cost
D) Income tax expense for the period will be the same under all assumptions.