Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?
A)FIFO
B)LIFO
C)Specific identification
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 lower cost, inventory to the cost of goods sold. This results in higher reported income and consequently higher income tax expense compared to other methods.

Which Inventory Costing Method Results in the Lowest Income Tax