Knowledge Check Question 3: When inventory prices are falling, using the LIFO costing method will generally result in a: A. Lower ending inventory value than under FIFO B. Lower income tax expense than under FIFO C. Lower cost of goods sold than under FIFO D. Lower net income than under FIFO

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Can you explain why the answer is B and not C. If inventory prices are decreasing wouldnt LIFO result in a lower COGS and which would lead to a higher Net income thus higher income tax expense?

Knowledge Check Question 3:
When inventory prices are falling,
using the LIFO costing method will
generally result in a:
A. Lower ending inventory value than under FIFO
B. Lower income tax expense than under FIFO
C. Lower cost of goods sold than under FIFO
D. Lower net income than under FIFO
Transcribed Image Text:Knowledge Check Question 3: When inventory prices are falling, using the LIFO costing method will generally result in a: A. Lower ending inventory value than under FIFO B. Lower income tax expense than under FIFO C. Lower cost of goods sold than under FIFO D. Lower net income than under FIFO
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