Lifo yields lifo yields lower ending inventory lower

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LIFO yieldsLIFO yields_Lower ending inventory_Lower ending inventory_Higher cost of merchandise sold_Higher cost of merchandise sold_Lower gross profit (net income)_Lower gross profit (net income)Weighted average yields the results between the two.Weighted average yields the results between the two.In periods of declining (decreasing) prices:In periods of declining (decreasing) prices:FIFO yieldsFIFO yields_ Lower ending inventory_ Lower ending inventory_ Higher cost of merchandise sold_ Higher cost of merchandise sold_ Lower gross profit or net income_ Lower gross profit or net incomeLIFO yieldsLIFO yields_ higher ending inventory_ higher ending inventory_ Lower cost of merchandise sold_ Lower cost of merchandise sold_ Higher gross profit or net income_ Higher gross profit or net incomeWeighted average- between the twoWeighted average- between the two1.7. Valuation of inventory at other than costIt was explained how costs are assigned to ending inventory and cost of goods sold using one of fourIt was explained how costs are assigned to ending inventory and cost of goods sold using one of fourcosting methods (FIFO, LIFO, Weighted average, or specific identification). Yet, the cost of inventory iscosting methods (FIFO, LIFO, Weighted average, or specific identification). Yet, the cost of inventory isnot necessarily the amount always reported on a balance sheet. Accounting principles require thatnot necessarily the amount always reported on a balance sheet. Accounting principles require thatinventory be reported at the market value of replacing inventory when market is lower than cost.inventory be reported at the market value of replacing inventory when market is lower than cost.Merchandise inventory is then said to be reported on the balance sheet at the lower of cost or marketMerchandise inventory is then said to be reported on the balance sheet at the lower of cost or market(LCM).(LCM).In applying LCM, cost is the acquisition price of inventory computed using one of the historical costIn applying LCM, cost is the acquisition price of inventory computed using one of the historical costmethods - specific identification, FIFO, LIFO, and Weighted average; market is defined as the currentmethods - specific identification, FIFO, LIFO, and Weighted average; market is defined as the currentmarket value (cost) of replacing inventory. It is the current cost of purchasing the same inventory items inmarket value (cost) of replacing inventory. It is the current cost of purchasing the same inventory items inthe usual manner. It is important to know that market is not defined as the sales prices. A decline in marketthe usual manner. It is important to know that market is not defined as the sales prices. A decline in marketcost reflects a loss of value in inventory. This is because the recorded cost of inventory is higher than thecost reflects a loss of value in inventory. This is because the recorded cost of inventory is higher than thecurrent market cost. When this occurs, a loss is recognized. This is done by recognizing the decline incurrent market cost. When this occurs, a loss is recognized. This is done by recognizing the decline inmerchandise inventory from recorded cost to market cost at the end of the period.

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