Chapter 5 exercises.docx - Maria Garnica Bridgette Mahan FA 223 Chapter 5 Exercises Exercise 5.17 A Explain why “better matching” occurs with LIFO

Chapter 5 exercises.docx - Maria Garnica Bridgette Mahan FA...

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Maria Garnica Bridgette Mahan FA 223 04/30/2019 Chapter 5 Exercises: Exercise 5.17: A. Explain why “better matching” occurs with LIFO. - Under LIFO “better matching” occurs because it recognizes costs and revenues at current prices. This is due to, the most recent units being associated to the cost of goods sold. 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? - In periods of inflation the LIFO method inventory results in a lower ending balance or carrying value in the balance sheet. In other words, the actual value of inventory in the balance sheet would be less than the actual current prices because the left over inventory would be considered old and even obsolete. Exercise 5.18: A. Calculate the firm’s ROI under each cost flow assumption (FIFO and LIFO)
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  • Fall '19
  • Generally Accepted Accounting Principles, $300,000, $1,700,000, Bridgette Mahan, $12,200,000

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