Which inventory cost method offers income tax savings during periods of rising prices? a. specific identification inventory cost method b. weighted average inventory cost method c. FIFO inventory cost method d. LIFO inventory cost method

Question

Heidi Mcdonald

Business

9 March, 10:58

Which inventory cost method offers income tax savings during periods of rising prices? a. specific identification inventory cost method b. weighted average inventory cost method c. FIFO inventory cost method d. LIFO inventory cost method

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Answers (1)

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Barnett · Answer 1

LIFO inventory cost method

Explanation:

LIFO inventory cost method uses for COGS the newest units.

The price if this newest units is higher than the older ones. Therefore, the COGS recognize forthe peiod, will be higher.

A hihger COGS will result in a lower Gross profit, and this in a lower net income.

As a result of a lower net income, the income tax are lower as well.