Which of the Following Inventory Valuation Methods Minimizes Income Tax

question 84

Multiple Choice

Which of the following inventory valuation methods minimizes income tax payment during a period of rising inventory costs?

• A)first-in,first-out
• B)last-in,first-out
• C)weighted-average
• D)specific identification

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Definitions:

Unrealized Gain

The potential profit on an investment that has not been sold, reflecting an increase in value on paper but not realized as cash.

Dividend Revenue

Income earned from holding shares of a company that pays dividends.

Interest Revenue

Income earned on investments, savings accounts, and other financial instruments that pay interest.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.