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:

Law of Small Numbers

A cognitive bias that leads people to make unjustified conclusions based on limited data.

Risks

The potential for losing something of value, or the uncertainty regarding the outcome of an action or decision.

Probability

The likelihood or chance of an event occurring, often expressed as a number between 0 and 1.

Small-Numbers Bias

A situation in markets where the fewness of buyers or sellers can significantly impact the negotiation power and market outcomes.