This preview shows page 1. Sign up to view the full content.
Unformatted text preview: If the cost of goods sold varies, net income varies. Less net income means a smaller tax bill. In times of rising prices, LIFO (especially LIFO in a periodic system) produces the lowest ending inventory value, the highest cost of goods sold, and the lowest net income. Therefore, many companies in the United States use LIFO even if the method does not accurately reflect the actual flow of merchandise through the company. The Internal Revenue Service accepts LIFO as long as the same method is used for financial reporting purposes....
View Full Document
- Fall '10