When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any)?
A)weighted average.
B)FIFO.
C)LIFO.
D)None of these; inventory methods cannot affect cash flows.

Question

Quizplus · Accepted Answer

When prices are rising, LIFO will result in the highest cost of goods sold (most recent purchases), and therefore will result in the lowest income tax expense. Income tax expense is the only cash flow affected by cost flow assumption.

When Prices Are Rising, Which Method of Inventory, If Any