The primary reason for the popularity of the LIFO flow assumption is that this method:
A) Is most appropriate when each item in inventory is unique.
B) Tends to minimize taxable income.
C) Causes inventory to be reported at or near its current replacement cost.
D) Reduces the amount of money "tied up" in inventory.

Question

Quizplus · Accepted Answer

The primary reason for the popularity of LIFO flow assumption is that it tends to minimize taxable income. Under LIFO, the COGS is based on the most recent inventory costs, which are typically higher due to inflationary pressures. This leads to a lower net income and therefore lower taxes.

The Primary Reason for the Popularity of the LIFO Flow