In a period of rising purchase costs, LIFO usually gives a lower taxable income and therefore, yields a tax advantage.

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased inventory is sold first, which results in higher cost of goods sold and lower taxable income in a period of rising purchase costs. This, in turn, leads to a lower tax liability and hence, yields a tax advantage.

In a Period of Rising Purchase Costs, LIFO Usually Gives