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Doncouse_Jeremy_Week3 - the lower cost of goods sold LIFO...

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Jeremy Doncouse FIN316 Case 6-1 on page 226 December 20, 2008 Required A. Working capital = current assets – current liabilities. For 2004 Working capital = $996.8 – 672.0, therefore, working capital = $324.8. B. LIFO balance is -$24.9. LIFO assumes that the costs of the latest items bought or produced are matched against current sales. This assumption usually materially improves the matching of current costs against current revenue, so the resulting profit figure is usually fairly realistic. C. LIFO would be higher because of the deflation of the FIFO inventory because of
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Unformatted text preview: the lower cost of goods sold. LIFO is closer to reality in both inflationary and deflationary periods because the cost of goods sold is closer to replacement cost. D. LIFO 1. Price increases - lower 2. Price decreases - higher 3. Constant prices - same FIFO 1. Price increases - higher 2. Price decreases - lower 3. Constant prices - same E. LIFO 1. Price increases - increases 2. Price decreases - lowers 3. Constant costs - same FIFO 1. Price increases - lowers 2. Price decreases - increases 3. Constant costs - same F. Yes to both....
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