In a period of rising prices,which inventory method is best to use for tax purposes?
A)FIFO
B)Average-cost
C)Specific identification
D)LIFO

Question

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased inventory items are sold first, allowing for the cost of goods sold to be calculated using the highest priced inventory items. In a period of rising prices, this results in a lower cost of goods sold which leads to higher net income and lower taxable income. Therefore, LIFO is the best choice for tax purposes during periods of rising prices.

In a Period of Rising Prices,which Inventory Method Is Best