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Hinson 10-4 Change in Inventory Method

Hinson 10-4 Change in Inventory Method - must use LIFO for...

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Intermediate Accounting I Assignment 10-4 Change in Inventory Method Jamie Hinson March 10, 2008 Real World Case 9-7 1. Because the average cost method assumes cost of goods sold and ending inventory consist of a mixture of all goods available for sale. LIFO is used to simplify recordkeeping and reduces the risk of LIFO liquidation by grouping inventory unite into pools based on physical similarities of the individual units. If the company uses LIFO to measure taxable income, the company also
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Unformatted text preview: must use LIFO for external financial reporting. So if the company switches from LIFO to the average cost method, their taxable income calculations will also have to change. 2. Even though the inventory remained stable during the first nine months of 2000, the cost of inventory will go down considering moving from a LIFO method to an average cost method. The average cost method will take away from the price as opposed to the LIFO method....
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