ACCT410 Unit 3 DB - Acquisitions and Payments

These include such things as below current prices

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These include such things as: below current prices; goods sold cost is more while the net income is less; inventory during inflation times the company’s balance sheet shows the inventory costs minus inflation in which goods sold cost increases while taxable income decreases; the LIFO Reserve is the inventory from the current and past year gap is widened by inflation and the annual benefits grow; and yearly deduction tax savings can be reinvested into the business or invested in other options (“LIFO Inventory Planning,” n.d.). The LIFO system can increase the company’s available cash while minimizing the net income tax. In turn, this gives more cash for the company’s working capital (“LIFO Inventory Planning,” n.d.). Ethical? According to Romeo (2009), the company does not benefit by LIFO accounting method on their balance sheet because an inventory understatement is created and the only benefit is that the company’s taxable income is reduced. LIFO has been under debate and although it is permitted by the Generally Accepted Accounting Principles (GAAP), if the International Financial Reporting Standards (IFRS) were to be implemented in the United States (U.S.) it would be abolished because the inventory method would not be permitted. The LIFO is an acceptable accounting principle with the GAAP and under the Statement of Financial Accounting Standard No. 154: Accounting Changes and Error Corrections (SFAS 154) that unless impractical, that the change effects presented should be retrospective in all financial statements from all presented periods. These changes would ultimately affect the pretax income and gross profit from the previous periods.
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