Which company is minimizing income taxes

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Reference no: EM1314548

Effects of FIFO and LIFO system of inventories.

Company A and Company B sells the same product. The cost of this product has been rising steadily throughout the year. Both companies reported the same net income for the year, although Company A used the first-in, first-out method of pricing inventory, while Company B used the last-in, first-out method.

(a) Which company is minimizing income taxes it must pay?

(b) Which company would have reported the higher net income if both companies had used the same method of pricing inventory?

Reference no: EM1314548

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