ACC 205 - Week 3 - Discussion 1 - ACC 205 Week 3 Discussion...

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ACC 205 – Week 3 – Discussion 1 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? Companies that have inventory tend to implement some type of inventory costing method to account for (as the title describes) the cost of the inventory and additionally the income made from the inventory on hand. There are a few different cost flow assumptions that can be used (Wainwright, 2012). One of those assumptions is FIFO or first-in, first-out. First-in, first-out is “an inventory-costing method, the assumption is that units are sold from the first, or earliest, available units” (Wainwright, 2012). LIFO is another assumption. LIFO stands for last-in, first-out meaning the most recent additions to inventory will be the

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