In a Period When Costs Are Falling and Inventory Quantities

question 171

Multiple Choice

In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:

• A) Weighted average.
• B) LIFO.
• C) Moving average.
• D) FIFO.

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Definitions:

Double-declining-balance

An accelerated method of depreciation which doubles the normal depreciation rate, reducing the asset's book value more quickly.

Salvage Value

The forecasted price an asset will fetch at the time of sale once its period of usefulness is over.

Depreciation Expense

The allocation of the cost of an asset over its useful life to account for declines in value over time.

Double-declining-balance

An accelerated depreciation method that doubles the normal depreciation rate.