Proponents of the LIFO inventory cost flow assumption argue that this costing method is superior to the alternatives because it results in better matching of revenue and expense. Required: a. Under LIFO, the release of the most recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. 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? a. b. It understates the value of inventory in the balance sheet. It overstates the value of inventory in the balance sheet.
Proponents of the LIFO inventory cost flow assumption argue that this costing method is superior to the alternatives because it results in better matching of revenue and expense. Required: a. Under LIFO, the release of the most recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. 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? a. b. It understates the value of inventory in the balance sheet. It overstates the value of inventory in the balance sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Proponents of the LIFO inventory cost flow assumption argue that this costing method is superior to the alternatives
because it results in better matching of revenue and expense.
Required:
a. Under LIFO, the release of the most recent purchase costs to the Cost of Goods Sold account results in better
matching of revenue and expense.
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?
a.
b.
It understates the value of inventory in the balance sheet.
It overstates the value of inventory in the balance sheet.
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