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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.

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Comments ( 1 )

  1. Sachin Pachori
    Sachin Pachori :
    5 years ago

    the FIFO inventory costing method will produce a higher net income, and thus a higher tax liability
    So LIFO method would be used.

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