Which Inventory Costing Method Results in the Lowest Income Tax

question 179

Multiple Choice

Which inventory costing method results in the lowest income tax expense during a period of decreasing purchase prices?

• A)FIFO
• B)LIFO
• C)specific identification
• D)weighted average cost

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Definitions:

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Accounts Payable

Liabilities of a business representing amounts owed to creditors for goods and services received but not yet paid for.

Noncash Transactions

Financial activities that do not involve the transfer of cash, including depreciation, stock-based compensation, and asset exchanges, but impact the financial statements.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity, within a specific period.