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:

Payroll Tax

Charges levied on both employers and employees, typically based on a proportion of the wages that businesses distribute to their workers.

Wage Base

The maximum amount of earnings that is subjected to certain taxes, such as Social Security taxes, within a given time period.

Excise Tax

A tax charged on specific goods and services, such as alcohol and tobacco, usually to discourage their use or generate revenue.

Direct Tax

A tax levied directly on an individual or an organization's income or wealth, such as income tax or property tax.