Compare the effects of the different costing methods on the financial statements
-In order to pay the least income tax possible in periods of decreasing inventory costs, the company should use which of the following inventory costing methods?

Question

Quizplus · Accepted Answer

Using First-in, First-out (FIFO) method of inventory costing will result in lower taxable income during decreasing inventory costs period as it assumes that inventory that was purchased first is sold first. Therefore, the cost of goods sold will be based on the oldest cost of inventory, which is higher than the current replacement cost resulting in lower taxable income. However, it is important to note that the choice of inventory costing method should not be based solely on tax considerations as it can also affect financial statements and decision-making processes.

Compare the Effects of the Different Costing Methods on the Financial