question 10 of 10\npolicies\ncurrent attempt in progress\nin a period of inflation, which cost flow method…

Brief Explanations:

• FIFO (First - In, First - Out) method:
  • In a period of inflation, under the FIFO method, the cost of goods sold is based on the earlier (lower - cost) inventory items.
  • Since cost of goods sold is lower, gross profit (sales - cost of goods sold) is higher. And with other factors (like operating expenses etc.) remaining relatively constant, net income (gross profit - operating expenses - taxes etc.) is higher.
  • Average - cost method:
    • It takes an average of the costs of inventory items. The average cost will be higher than the cost of the earliest inventory items (but lower than the cost of the latest inventory items in an inflationary period), so cost of goods sold is higher than under FIFO, leading to lower net income than FIFO.
  • LIFO (Last - In, First - Out) method:
    • In inflation, LIFO uses the latest (higher - cost) inventory items for cost of goods sold. So cost of goods sold is higher, gross profit is lower, and thus net income is lower than FIFO.
  • Gross profit method:
    • This is not a cost - flow assumption for inventory valuation in the same sense as the other methods. It is more of a way to estimate inventory or cost of goods sold based on the relationship between sales, cost of goods sold, and gross profit percentage. It does not directly determine net income in the context of cost - flow assumptions for inventory like FIFO, LIFO, or average - cost.

Answer:

B. FIFO method