Answered: Can you explain how using LIFO for…

Can you explain how using LIFO for inventory valuation might affect financial reporting during inflation compared to FIFO, and why companies might prefer one method over the other?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter2: Introduction To Financial Statements

Section: Chapter Questions

Problem 12MC: Which of the following is not an element of the financial statements? A. future potential sales...

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Question

Can you explain how using LIFO for inventory valuation might affect financial reporting during inflation compared to FIFO, and why companies might prefer one method over the other?

Definition Definition Accounting practice that allows a business to determine the monetary value of any unsold inventory.

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Which of the following is not an element of the financial statements? A. future potential sales price of inventory B. assets C. liabilities D. equity
Required: 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?
What factors might call for inventory valuation at salesprices (net realizable value or market price)?
FIFO and weighted average. But what if a company wants to use LIFO to report its inventory because of the significant tax benefit? How could dollar-value LIFO help them use FIFO for managerial purposes but LIFO for financial statement reporting?
Which inventory method will result in lower net income in a period of rising prices? Which inventory method will result in lower net income in a period of falling prices?
Which of the following is not an element of the financial statements? Group of answer choices 1.future potential sales price of inventory 2.assets 3.liabilities 4.equity
a) Compare the periodic versus the perpetual system as a control device. b) What sort of organisations are likely to use the periodic inventory system?What kind of organisations will prefer to use perpetual inventory system?c) If management overstated the valuation of inventory, would it affect profit for the year?
When would using the FIFO inventory costing method produce higher inventory account balancesthan the LIFO method would?A. inflationary timesB. deflationary timesC. alwaysD. never
the lower cost or market is a method of inventory valuation true or false?
Which accounting rule serves as the primary basis for the lower-of-cost-or-market methodology for inventory valuation? A. conservatism B. consistency C. optimism D. pessimism
Considering the following information, and applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?
How do you measure gross margin return on inventory(GMROI)?