Henri Company uses the average-cost inventory method. Its 2014 ending inventory was €40,000, but it would have been €60,000 if FIFO had been used. Thus, if FIFO had been used, Henri's income before income taxes would have been
A) €20,000 greater.
B) €20,000 less.
C) the same.
D) not determinable without the tax rate.

Question

Quizplus · Accepted Answer

Under FIFO, the ending inventory is higher by €20,000, which means the cost of goods sold would be lower by €20,000, resulting in a €20,000 increase in income before taxes.

Henri Company Uses the Average-Cost Inventory Method