In order to pay the least income tax possible in periods of rising inventory costs, the company should use which of the following inventory costing methods?

Question

Quizplus · Accepted Answer

In periods of rising inventory costs, the LIFO (Last In, First Out) method results in higher cost of goods sold and lower ending inventory on the balance sheet. This is because the most recently acquired (and presumably more expensive) inventory items are considered sold first. Consequently, higher costs of goods sold reduce taxable income, leading to lower income taxes in the short term.

In Order to Pay the Least Income Tax Possible in Periods