During a period of rising prices,if a firm desired to report a low net income figure in hopes of reducing their income tax liability,the firm would use the ________ inventory valuation method.

Question

Quizplus · Accepted Answer

LIFO assumes that the last items purchased are the first items sold, which means that the cost of goods sold will reflect the higher prices of the newer inventory. This results in a lower reported net income, which reduces the tax liability. This method is particularly effective during a period of rising prices because it matches the higher costs of goods sold with the higher revenues earned during that period. Therefore, the best choice is B) LIFO.

During a Period of Rising Prices,if a Firm Desired to Report