Q

If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?

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Last-in-first-out (LIFO) yields the lowest annual after-tax net income because the most recent items are sold first. Rising costs translate to recording the highest-priced unit first, which increases the taxable income, thus lowering the annual income tax. Last-in-first-out (LIFO) yields the most increased cost of goods and gives you the lowest taxable income, thus increasing the payment for the organization.

First-in-first-out (FIFO) gives you a high taxable income but a low cost of goods. Due to the steady price level rise, FIFO will yield the most insufficient annual after-tax net income since the oldest inventory will be sold out at a lower cost than the new inventory unit.

Weighted cost is usually used to determine the cost of difficult items to determine their difficult price. The income tax yielded in the method is between the other two techniques. The FIFO method produces the highest after-tax net income for a steadily declining price level since older items are sold out first at a lower cost and a higher taxable income.

Further research on topic

FIFO and LIFO: The Main Differences

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Sweetstudy.co (February 1, 2023) If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?. Retrieved from https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/.

"If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?." Sweetstudy.co - February 1, 2023, https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/

Sweetstudy.co January 20, 2023 If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?., viewed February 1, 2023,<https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/>

Sweetstudy.co - If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?. [Internet]. [Accessed February 1, 2023]. Available from: https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/

"If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?." Sweetstudy.co - Accessed February 1, 2023. https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/

"If an inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing – FIFO, LIFO, or weighted average cost – will yield the lowest annual after-tax net income? Which will produce the highest after-tax net income in a scenario where the price level steadily declines?." Sweetstudy.co [Online]. Available: https://sweetstudy.co/questions/if-an-inventory-is-being-valued-at-cost-and-the-price-level-is-steadily-rising-which-of-the-three-methods-of-costing-fifo-lifo-or-weighted-average-cost-will-yield-the-lowest-ann/. [Accessed: February 1, 2023]

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