First in first out fifo the oldest good purchased are

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First in First out (FIFO): the oldest good purchased are sold first and the newest goods purchased remain in ending inventory. Therefore, cost of sales reflects the cost of goods in beginning inventory plus the cost of items purchased earliest in the accounting period, and the ending inventory reflects the costs of goods purchased more recently. In the periods of rising prices, the costs assigned to the units in the ending inventory are higher than the costs assigned to the units sold. Conversely, in periods of declining prices, the costs assigned to the units in the ending inventory are lower than the costs assigned to the units sold. Last in First Out (LIFO): the newest good purchased are sold first and the oldest goods purchased remain in ending inventory. In other words, the last units included in inventory are assumed to be the first units sold from inventory. Therefore, cost of sales reflects the cost of goods purchased more recently, and the value of ending inventory reflects the costs of older goods. In the periods of rising prices, the costs assigned to the units in the ending inventory are lower than the costs assigned to the units sold. Conversely, in periods of declining prices, the costs assigned to the units in the ending inventory are higher than the costs assigned to the units sold. The LIFO method is widely used in the U.S mainly due to the potential income tax savings when inventory costs are increasing. Weighted Average Cost: the average cost of the goods available for sale during the accounting period to the units that are sold as well as to the unit in ending inventory. If the cost of inventory are increasing: ° Companies using LIFO method tend to have higher cost of sales, lower profit markets, tax expense and net income. ° The balance sheet consequences include lower ending inventory, working capital, total assets, retained earnings, and equity. ° The lower income tax paid will result in higher net cash flow from operating activities. ° Companies are more likely to be associated with lower current ratio, higher leverage ratios, and lower profitability ratios. Question 4: What are major motivations of merger and acquisition? The primary motivation for mergers is to increase the value of the combined firm.
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assuming A + B> C If C’s value exceeds that of A and B, then synergy is said to exist. Synergy : the combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit. Economy of scale and scope in production and distribution Larger company can enjoy economies of scale or savings from producing goods in high volume Larger company can also enjoy economies of scope, savings that come from combining the marketing and distribution of different types of related products.
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