In a Period of Increasing Prices, Which Inventory Flow Assumption

question 73

Multiple Choice

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

• A)FIFO
• B)LIFO
• C)Average Cost
• D)Income tax expense for the period will be the same under all assumptions.

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Definitions:

CCA Class

Capital Cost Allowance Class, a categorization in tax systems for depreciation of tangible property.

Tax Rate

The proportion of income or value of goods taxed by the government, applicable to individuals, corporations, and transactions.

Operating Cash Flow

The cash generated from the normal operating activities of a business, reflecting the amount of cash that a company can produce through its normal business operations.

Capital Cost Allowance

A tax deduction in many tax systems for businesses, allowing them to depreciate the cost of assets over time.