In an inflationary period, which inventory method—FIFO, LIFO, average cost—will show the highest net income? 

In an inflationary period, the inventory method that would show the highest net income is Last-in First Out (LIFO). This is because when prices of goods increase over time, LIFO matches the costs of new inventory with current sales which results in higher cost of goods sold and therefore a lower amount of taxable income. Additionally, it also reflects current market value and helps to avoid profit erosion by reducing profits on unsold items.

Conversely, the First-in First-Out (FIFO) inventory method assumes that older stock will be sold first which may not be reflective of true market conditions when inflation is present. Moreover, this approach fails to capture rising costs resulting in inflated profits which could potentially lead to higher taxes. Lastly, average cost does not differentiate between old and new stock and thus does not account for changes in pricing making it unreliable during periods of inflation.