fill in the blank question\nmany companies choose to use lifo inventory costing during periods of rising…

fill in the blank question\nmany companies choose to use lifo inventory costing during periods of rising purchase costs because reported cost of goods sold will be\n(lowest/highest). this means that income taxes paid will be (lower/higher) than if the company\nused fifo or weighted average inventory costing.\nneed help? review these concept resources.\nread about the concept

fill in the blank question\nmany companies choose to use lifo inventory costing during periods of rising purchase costs because reported cost of goods sold will be\n(lowest/highest). this means that income taxes paid will be (lower/higher) than if the company\nused fifo or weighted average inventory costing.\nneed help? review these concept resources.\nread about the concept

Answer

Brief Explanations:

  • LIFO (Last - In, First - Out): When purchase costs are rising, under LIFO, the most recently (and higher - cost) inventory items are assumed to be sold first. So, the cost of goods sold (COGS) is calculated using these higher - cost items. This makes the reported COGS the highest among LIFO, FIFO (First - In, First - Out), and weighted - average methods during rising costs.
  • Income Tax Impact: Since COGS is an expense that reduces net income. A higher COGS (under LIFO) leads to a lower net income. Income tax is calculated based on net income. So, with a lower net income (due to higher COGS), the income tax paid will be lower compared to using FIFO or weighted - average (where COGS is lower, net income is higher, and thus income tax is higher).

Answer:

First blank: highest; Second blank: lower.