MANAGEMENT

Detailed explanation-1: -“Because FIFO results in a higher net income during periods of rising prices, it also results in higher income tax expenses, ” Ng said. “Conversely, if the LIFO method is used during a period of rising prices, it will result in lower net income. So, this method would result in a lower income tax expense.”

Detailed explanation-2: -Last-In, First-Out (LIFO) inventory deductions allow companies to deduct the cost of inventory at the price of the most recently acquired items and assumes that the last inventory purchased is the first to be sold. LIFO limits the impacts of volatile prices or inflation and lowers the tax cost of new inventory.

Detailed explanation-3: -The LIFO method is used in the COGS (Cost of Goods Sold) calculation when the costs of producing a product or acquiring inventory has been increasing. This may be due to inflation.

Detailed explanation-4: -LIFO (Last-In, First-Out) is one method of inventory used to determine the cost of inventory for the cost of goods sold calculation. LIFO valuation considers the last items in inventory are sold first, as opposed to LIFO, which considers the first inventory items being sold first.