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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 3QTD

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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?

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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)?
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 income statement account(s) would be affected by a policy choice at the same time as the inventory balance sheet account. a. Bad debts expense b. Cost of goods sold expense c. Depreciation or amortisation expense d. Sales revenue
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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?
What is the dollar-value method of LIFO inventory valuation?What advantage does the dollar-value methodhave over the specific goods approach of LIFO inventoryvaluation? Why will the traditional LIFO inventory costingmethod and the dollar-value LIFO inventory costingmethod produce different inventory valuations if thecomposition of the inventory base changes?
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