FIFO 1 - c) Net income = overstated c) Equity = overstated...

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VI. Financial statement effects of costing methods A. Cost flow assumptions 1. FIFO a) Ending inventory reflects current replacement cost (accurate balance sheet) b) Profits reflect outdated values (inaccurate income statement) 2. LIFO a) Records of COGS reflect current replacement cost (accurate income statement) b) Balance sheet reports inventory at outdated values (inaccurate balance sheet) 3. Weighted average a) Smoothes out price changes B. In periods of rising prices 1. FIFO a) COGS = understated b) Ending inventory = overstated
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Unformatted text preview: c) Net income = overstated c) Equity = overstated d) Income taxes = overstated 2. LIFO a) COGS =overstated b) Ending inventory = understated c) Net income = understated c) Equity = understated d) Income taxes = understated C. In periods of falling prices 1. FIFO a) COGS =overstated b) Ending inventory = understated c) Net Income = understated c) Equity = understated d) Income taxes = understated 2. LIFO a) COGS = understated b) Ending inventory = overstated c) Net income = overstated d) Equity = overstated...
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This note was uploaded on 02/09/2012 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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FIFO 1 - c) Net income = overstated c) Equity = overstated...

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