Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?
A) Specific Identification
B) LIFO
C) FIFO
D) Weighted Average Cost

Question

Quizplus · Accepted Answer

During a period of decreasing prices, the FIFO (First In, First Out) method results in the lowest income tax expense because it assigns the oldest, and typically higher, costs to the cost of goods sold, resulting in higher reported income and thus higher income tax expense compared to other methods.

Which Inventory Costing Method Results in the Lowest Income Tax