W3-D1 - LIFO vs FIFO The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method The

W3-D1 - LIFO vs FIFO The controller of Sagehen Enterprises...

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LIFO vs. FIFO The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the net income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods? Guided Response: Analyze several of your peers’ posts. Let at least two of your peers know if a company is better off if it switches from a LIFO method to a FIFO method? Explain your reasoning. LIFO, the Last In- First Out method, assumes that the inventory that was most recently acquired is what is sold first. The FIFO, First In- First Out method, assumes that the inventory that was acquired first (therefore the oldest inventory) is sold first. In general, the flow of inventory will follow the FIFO method as the oldest inventory will be sold first. This would be especially true for any businesses involving perishable food items. The primary difference between the two

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