Which of the following is NOT a common method of valuing inventory?

The correct understanding lies in recognizing that "Last In, First Out" (LIFO) is indeed a common and widely used inventory valuation method. LIFO assumes that the last items added to inventory are the first ones sold, which can significantly affect the cost of goods sold and tax liability during periods of inflation.

The other methods listed—Cost, Lower of Cost or Market, and Average Cost—are all established approaches to inventory valuation. The Cost method establishes inventory value based on the historical cost incurred to acquire the goods, while Lower of Cost or Market provides a conservative approach by accounting for market value in situations where the latter is lower than the purchase cost. Average Cost calculates inventory value based on the average cost of all similar items, balancing fluctuations due to price changes over time.

Thus, LIFO is not only a recognized method but is also commonly applied in financial reporting and affects tax considerations. Recognizing these valuation methods is crucial for accurate financial accounting and tax preparation.