Aiwa IncUses the Average-Cost Inventory Method

question 102

Multiple Choice

Aiwa Inc.uses the average-cost inventory method.Its 2011, the company reported net income of ¥59,800,000.Had average-cost been used, the company would have reported net income of ¥58,900,000.Assuming a 25% tax rate, what is the impact of the inventory cost flow assumption on Aiwa's taxes for 2011?

• A)Aiwa would pay ¥225,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO.
• B)Aiwa would pay ¥675,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO.
• C)the inventory method does not impact the amount of income tax paid.
• D)not determinable without income before taxes.

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Definitions:

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