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 method
D)Income tax expense for the period will be the same under all assumptions.

Question

Quizplus · Accepted Answer

Under LIFO (Last-In, First-Out), the most recent, higher-cost inventory is expensed first, resulting in a higher cost of goods sold and lower taxable income, thus reducing income tax expense in a period of rising prices.

In a Period of Increasing Prices, Which Inventory Flow Assumption