Suppose that the management of Home Depot is considering the effects of various inventory costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing.

Which method will result in the lowest income tax expense?

method will result in the lowest income tax expense.

Which method will provide the highest net income?

method will provide the highest net income.

Which method will provide the highest ending inventory?

method will provide the highest ending inventory.

Which method will result in the most stable earnings over a number of years?

will result in the most stable earnings over a number of years.

Options are : average cost method, FIFO, LIFO