Assuming sales hold steady, which of the following actions would result in lowering income taxes for a company that uses the LIFO inventory method?
A) Increasing sales prices
B) Buying extra inventory near the end of the year in an inflationary environment
C) Allowing the inventory quantity at year end to fall below beginning year levels
D) None of these. All would cause increasing taxes

Question

Quizplus · Accepted Answer

Buying extra inventory near the end of the year in an inflationary environment increases the cost of goods sold under LIFO, which reduces taxable income and thus lowers income taxes.

Assuming Sales Hold Steady, Which of the Following Actions Would