Question #5

Companies can use various methods to determine the cost of inventory, including FIFO, LIFO, and average cost. In a period in which the cost of inventory is rising, which of the following statements is true?

The LIFO method will result in the highest inventory balance at year-end.

The LIFO method will result in the lowest income tax expense.

The average cost method will result in the lowest inventory balance at year-end.

The average cost method will result in the highest net income.

The average cost method will result in the highest inventory balance at year-end.

None of the listed choices are correct.

The LIFO method will result in the lowest cost of goods sold.

The FIFO method will result in the lowest net income.