Assume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?

The cost flow assumption behind the first in, first out (FIFO) approach of inventory valuation is…

Assume that you are the president of your compar year-end bonus according to the amount of net ine during the year. When prices are rising, would you or weighted average cost flow assumption? Explai example to support your answer. Would your choi if prices were falling?

Assume that you are the president of your compar year-end bonus according to the amount of net ine during the year. When prices are rising, would you or weighted average cost flow assumption? Explai example to support your answer. Would your choi if prices were falling?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?

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