current event 2

current event 2 - Ellie Kahn AIS 100 Section 9 Current...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Ellie Kahn AIS 100 Section 9 Current Event 2 1. A. By lowering inventory levels at year-end, companies are able to lower their inventory holding taxes. This occurs because they are not reporting as high of an inventory. B. By using LIFO, companies are able to report a lower net income. This leads to the company having a lower income tax expense. Although this does not necessarily appeal to the investors and creditors, it allows the company to save the money that would be used on taxes for other places in the company. LIFO does this by taking into account the likelihood that there will be inflation rather than deflation. 2. A. The LIFO reserve is the difference between inventory reported using LIFO and inventory reported using FIFO. This is used in order to compare the inventories reported of companies that use the three different types of cash flow methods. B. The LIFO reserve does not effect how much a company is taxed because it is based on how the company reports their financial statements. By taking inflation into account under the LIFO cash flow assumption, companies tend to report a
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

current event 2 - Ellie Kahn AIS 100 Section 9 Current...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online