Aiwa Inc Uses the Average-Cost Inventory Method

Multiple Choice

Aiwa Inc. uses the average-cost inventory method. In 2014, the company reported net income of ¥59,600,000. Had average-cost been used, the company would have reported net income of ¥58,900,000. Assuming a 25% tax rate, what is the impact of the inventory cost flow assumption on Aiwa's taxes for 2014?

A) Aiwa would pay ¥175,000 less in taxes for 2014 as a result of using the average-cost inventory method rather than FIFO.
B) Aiwa would pay ¥525,000 less in taxes for 2014 as a result of using the average-cost inventory method rather than FIFO.
C) The inventory method does not impact the amount of income tax paid.
D) Not determinable without income before taxes.