Proponents of the LIFO inventory cost flow assumption argue that this costing methods is superior to the alternatives be...
Proponents of the LIFO inventory cost flow assumption argue that this costing methods is superior to the alternatives because it results in better matching of revenue and expense. A. explain why"better Matching" occurs with LIFO? B. What is the impact on the carrying value of inventory in the balance sheet when LIFO rather than FIFO is used during periods of inflation?
Homework Answers
Under LIFO method of valuation of inventory, inventory purchased later is sold first. Known as Last in First out method.
A. LIFO method results in "better matching" of revenue and expense because inventory purchased later represents the revenue and expense of latest time period. Because inventory purchased earlier is of lesser value as compared to recent time.
B. During periods of inflation, it is preferable to use LIFO method. So during inflation, when LIFO method is used, the carrying value of inventory in the balance sheet is of lower amount, because latest purchased inventory is first sold out, and the remaining is left out of older stock. Costs are increased in times of inflation, so older stock is at lower value.
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Proponents of the LIFO inventory cost flow assumption argue that this costing methods is superior to the alternatives be...
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CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 6-7 Lisa Company had 256 units in beginning inventory at a total cost of $26,112. The company purchased 512 units at a total cost of $66,560. At the end of the year, Lisa had 205 units in ending inventory. (a) Compute the cost of the ending inventory and the cost of goods sold under FIFO, LIFO, and average-cost. (Round average-cost per unit and final answers...
Which one of the following is not a disadvantage of the LIFO inventory cost flow assumption? impaired comparability between companies using LIFO failure to match the most recent costs with revenue the possibility of income manipulation by management the impact of LIFO liquidation profits
Chapters 5 &6 One of the principal reasons for selecting the LIFO cost flow assumption instead of the FiFO cost how assuimption in en inflationary economic e O income taxes will be lower. O net income will be higher O a higher selling price can be established O balance sheet inventory volues will be higher
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flow methods : FIFO, LIFO, Average Cost
CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 6-7 Lisa Company had 256 units in beginning inventory at a total cost of $26,112. The company purchased 512 units at a total cost of $66,560. At the end of the year, Lisa had 205 units in ending inventory. (a) Compute the cost of the ending inventory and the cost of goods sold under FIFO, LIFO, and average-cost. (Round average-cost per unit and final answers...
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