In a period of falling prices, the cost flow method that results in the lowest income taxes is the
A) FIFO method.
B) specific identification method.
C) average-cost method.
D) gross profit method.

Question

Quizplus · Accepted Answer

In a period of falling prices, the FIFO (First-In, First-Out) method results in the lowest income taxes because it assumes that the oldest, higher-cost inventory is sold first, leading to lower reported profits and thus lower taxes.

In a Period of Falling Prices, the Cost Flow Method