Which of the following is a method of computing inventory that small firms tend to use to save taxes when prices rise?
A) First-in, first-out method
B) Last-in, first-out method
C) Average-cost method
D) Direct tax method

Question

Quizplus · Accepted Answer

Small firms tend to use the last-in, first-out (LIFO) method of computing inventory when prices rise because this method assumes that the most recently purchased items are the first to be sold. This allows them to assign the higher cost of the most recently acquired inventory items to cost of goods sold, reducing their taxable income and thus saving on taxes.

Which of the Following Is a Method of Computing Inventory