Question

S ata Review View Developer Calibri (Body - 11 - A General BTU 2 OA 3 0 0 Merge Cewe $ % & Conditional Format Cell Formatting Table Styles Format fx Purchases should be easy enough. The COGS entries are where you have to think about the fact that we are using LIFO perpetual inventory to do the work. Look at what we 128 x 61 Exercise Clayton Company's inventory was 12,000 units with a cost of $ 160 each on 2010 January 1. During 2010, numerous units were purchased and sold. Also during 2010, the purchase price of this product fell steadily until at year-end it was $120. The inventory at year-end was 18,000 units. State which method of inventory measurement, LIFO or FIFO, would have 62 resulted in higher reported net income, and explain briefly Do your best to reason this al give me complete answers as Sheet +

Answer 1

LIFO - Last in first out method is one of valuation of inventory method in this method of Cost of goods sold will be valued at last purchased but taken first for sold.

FIFO – First in first our method is also one of the method of valuation of inventory. In this method cost of goods sold is taken on first came first taken basis.

Material prices sometimes are on rising basis and sometimes it is decline pricing basis. When the price of inventory is on increasing basis than Cost of Goods Sold as LIFO will be higher compare to cost of Goods sold as per FIFO basis.

When the price of inventory is fell steadily than Cost of Goods sold as per FIFO is higher than cost of Goods sold as per LIFO.

It means in given case Cost of Goods Sold as per LIFO is lower so overall net gain as per LIFO is higher.

Answer = LIFO method of inventory have the higher reported net income.