13. Espinosa Corporation has been using the FIFO cost flow method during a prolonged period of inflation. During the same time period, Espinosa has been paying out all of its net income as dividends. What adverse effects may result from this policy?
14. George Orear, a mid-level product manager for Theresa's Shoes, thinks his company should switch from LIFO to FIFO. He says, “My bonus is based on net income. If we switch it will increase net income and increase my bonus. The company would be better off and so would I.” Is he correct? Explain.
15. Discuss the impact the use of LIFO has on taxes paid, cash flows, and the quality of earnings ratio relative to the impact of FIFO when prices are increasing.
16. What inventory cost flow method does Tootsie Roll Industries use for U.S. inventories? What method does it use for foreign inventories? (Hint:You will need to examine the