Many taxpayers use the LIFO method of inventory valuation because during inflationary periods,LIFO normally results in the lowest valuation of ending inventory and,hence,the lowest taxable income.

Question

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LIFO (Last-In-First-Out) method assumes that the most recent goods purchased are the first sold, resulting in the oldest goods remaining in inventory. During inflationary periods, the cost of inventory increases over time, so using LIFO results in the highest cost of goods sold and the lowest valuation of ending inventory. This lower value of ending inventory leads to lower taxable income, making it a popular choice for reducing taxes during inflationary times.

Many Taxpayers Use the LIFO Method of Inventory Valuation Because