If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing— FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.

If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing— FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.

Name: If inventory is being valued at cost and the price level is steadily r
Uploaded: 2024-03-20T06:32:37.000Z
Channel: Bartleby
Description: If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing— FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 14DQ: If inventory prices are rising, which inventory costing method should produce the smallest payment...

See similar textbooks

Similar questions

If inventory prices are rising, which inventory costing method should produce the smallest payment for taxes?
How do you calculate the markup on cost of goods sold? Is the markup pure profit? Explain.
In rimes of rising prices, the inventory cost method that will yield the highest cost of goods sold is (a) LIFO. (b) weighted-average. (c) FIFO. (d) none of the above.
During a period of steadily rising prices, which of the methods of measuring the cost of goods is likely to result in the lowest taxable income? Last-in, first-out (LIFO) First-in, first-out (FIFO) Specific identification Average cost
Contrast the income statement effect of LIFO versus FIFO(on Cost of Goods Sold and Gross Profit) when ( a ) costsare rising and ( b ) costs are falling.
Baxter Corporation has been using FIFO during a period ofrising costs. Explain whether you would expect each of the following measurements to be higher or lower if the com-pany had been using LIFO. a. Net income.b. Inventory turnover rate.c. Income taxes expense.
For each of the following situations, indicate whether FIFO, LIFO, or weighted average applies: a. In a period of falling prices, net income would be highest. b. In a period of falling prices, the unit cost of goods would be the same for ending inventory and cost of goods sold. c. In a period of rising prices, net income would be highest. d. In a period of rising prices, cost of goods sold would be highest. e. In a period of rising prices, ending inventory would be highest.
1. Based on variable costing, what would the corporation show as the value of its ending inventory? 2. What would NUBD Corp. have reported as its income before income taxes if it had used variable costing?
During periods of rising prices, which method (FIFO-LIFO-AVCO) results in the highest gross profit? Why?
Which of the following is not a disadvantage of using the FIFO cost flow assumption? includes all the holding gains in income during periods of rising prices does not match current costs against current revenues provides a relevant ending inventory value creates the highest outflow for income taxes during periods of rising prices
If costs are rising, which of the following will be true?a. The cost of goods sold will be greater if LIFO is usedrather than weighted average.b. The cost of ending inventory will be greater if FIFO isused rather than LIFO.c. The gross profit will be greater if FIFO is used ratherthan LIFO.d. All of the above are true
As compared with the FIFO method of costing inventories,does the LIFO method result in a larger or smallernet income in a period of rising prices? What is the comparativeeffect on net income in a period of falling prices?