Which one of the following methods of inventory costing yields highest taxable income?
A. FIFO
B. LIFO
C. AVCO or averrage cost
D. Standard cost method
Answer: Option A
Solution (By Examveda Team)
FIFO methods of inventory costing yields highest taxable income. First-in, first-out, or FIFO, applies the earliest costs first. In rising markets, FIFO yields the lowest cost of goods sold and the highest taxable income.This Question Belongs to Commerce >> Accounting
Raising Market condition is not stated in question.
the FIFO inventory costing method will produce a higher net income, and thus a higher tax liability
So LIFO method would be used.