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With inflation what are the implications of using LIFO and FIFO inventory methods and how do they affect the cost of goods sold?
LIFO inventory valuation assumes the latest purchased inventory becomes part of the cost of goods sold, while the FIFO method assigns inventory items that were purchased first to the cost of goods sold. In an inflationary environment, the LIFO method will result in a higher cost of goods sold figure and one that more accurately matches the sales dollars recorded at current dollars.
To adjust a companys LIFO cost of goods sold to FIFO cost of goods sold?
a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold.
Is fifo the inventory costing method that follows the physical flow of the goods?
no, FIFO, LIFO, and weighted-average method are cost flow assumptions these assumptions bear no relation to the physical flow of goods; they are merely used to assign costs to inventory units.
How do the implications of using lifo and fifo inventory affect the cost of goods sold?
LIFO stands for Last In First Out, so the last piece of inventory you create (including the costs for that last piece of inventory), is the cost base you use when you match sales against costs of goods sold (COGS) FIFO stands for First in First Out, so the oldest piece of inventory you have is what you match against your next sale. So, in a period of increasing input prices to your production (which is the general norm), under a LIFO model, you'll see higher prices immediately impacting your COGS, whereas under a FIFO model, it will take some time before those higher costs are impacting your COGS.
How do you solve for fifo and lifo?
yes
With inflation what are the implications of using LIFO and FIFO inventory methods and how do they affect the cost of goods sold?
LIFO inventory valuation assumes the latest purchased inventory becomes part of the cost of goods sold, while the FIFO method assigns inventory items that were purchased first to the cost of goods sold. In an inflationary environment, the LIFO method will result in a higher cost of goods sold figure and one that more accurately matches the sales dollars recorded at current dollars.
Will the LIFO and FIFO approaches to pricing accounts payable impact the reportable income of a company?
Yes, During periods of significantly increasing costs, LIFO when compared to FIFO will cause a higher cost of goods sold on the income statement. Which means a lower net income.
Why does net income change with the FIFO?
FIFO (first in first out) is a method of account for inventory. With FIFO, if inventory costs are increasing your cost of goods sold will be lower than under the LIFO (last in first out) method. If inventory costs are increasing, FIFO will result in higher net income (lower COGS) than LIFO. If inventory costs are decreasing, FIFO will result in lower net income (higher COGS) than LIFO.
What are the advantages and disadvantages of FIFO?
In an economy of rising prices (during inflation), it is common for beginning companies to use FIFO for reporting the value of merchandise to bolster their balance sheet. As the older and cheaper goods are sold, the newer and more expensive goods remain as assets on the company's books. Having the higher valued inventory and the lower cost of goods sold on the company's financial statements may increase the chances of getting a loan.
To adjust a companys LIFO cost of goods sold to FIFO cost of goods sold?
a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold.
Is fifo the inventory costing method that follows the physical flow of the goods?
no, FIFO, LIFO, and weighted-average method are cost flow assumptions these assumptions bear no relation to the physical flow of goods; they are merely used to assign costs to inventory units.
What are the advantages of LIFO?
The major advantage of LIFO comes from the assumption that costs of goods typically increase over time. When expensing goods under LIFO in an environment in which costs are increases, you typically will report lower net income than under alternative methods such as FIFO, which decreases your tax liability.
When using the FIFO inventory costing method the most recent costs are assigned to the cost of goods sold true or false?
FIFO means first in first out so it means the items purchased earlier will be used in production first so it is not the recent prices which are allocated to cost of goods sold in LIFO last in first out most recent prices are used but not in FIFO.
What are the impact of LIFO FIFO methods on financial statements when prices are changing and stable?
"http://wiki.answers.com/Q/What_are_the_impact_of_LIFO_FIFO_methods_on_finacial_statments_when_prices_are_changing_and_stable"
What is fifo lifo?
Lifo Fifo
What are the two ways you can account for ending inventory and cost of goods sold?
Following are two ways: 1 - LIFO 2 - FIFO
What kind of businesses use FIFO?
If inventory goods are perishable, then FIFO is the best method because older goods need to be sold before newer goods. Some companies use LIFO because this strategy means less taxable income (assuming that prices are increasing). Regardless, whatever strategy a business uses for statements it must also use that strategy for income tax preparation.
