Writing Assignment ACG3131-1 - MEMORANDUM Oct 24 2012 TO YUN CHENG FROM ANDREW GOLDIN SUBJECT FACTORS TO BE CONSIDERED WHEN CHOOSING BETWEEN FIFO AND

Writing Assignment ACG3131-1 - MEMORANDUM Oct 24 2012 TO...

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MEMORANDUM Oct. 24 2012 TO: YUN CHENG FROM: ANDREW GOLDIN SUBJECT: FACTORS TO BE CONSIDERED WHEN CHOOSING BETWEEN FIFO AND LIFO Introduction This memo will discuss the factors that should be considered by Tangier Industries when choosing between FIFO and LIFO cost flow methods. The memo shall consider the effects on cost of goods sold and ending inventory when prices are increasing or decreasing when using LIFO or FIFO. In addition this memo will discuss the factors that influence one inventory method over another. Furthermore, this memo will consider whether there are methods to simplify LIFO. Lastly, the memo will consider specific rules and tax effects pertaining to FIFO or LIFO. Influencing Factors Several factors are to be considered when choosing between FIFO and LIFO cost flow methods. According to the FASB Accounting Standards Codification, the primary objective when choosing a cost flow method should be to select the method that most accurately reflects period income. (FASB ASC par. 330-10-30-

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