Which Inventory Costing Method Results in the Lowest Income Tax

question 159

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:

Strike Price

The price at which the holder of an option contract has the right to buy or sell the underlying asset.

Underlying Stock

The stock on which a derivative instrument, such as an option or future, is based.

Implied Volatility

A measure of the market's forecast of a likely movement in a security's price and is used to price options contracts.

Call Options

Financial derivatives that give the holder the right, but not the obligation, to buy an asset at a specified price within a specific timeframe.