Question

Changing Prices

You work for a CPA firm that has been hired by Widget Tek Inc., a merchandising company that is getting ready to expand. The president of Widget Tek Inc. is concerned with obtaining a loan for the expansion and wants to be sure that all the financial statements accurately reflect the company’s accounting records.

As preparation for this assignment, you have been asked to review the effects of changing prices on three inventory costing methods: LIFO, FIFO, and weighted average.

Identify the scenarios and inventory methods that result in the highest and lowest values for each item listed. Enter “Highest”, “Lowest”. if not affected select "No effect".

Inventory Records

Widget Tek Inc.’s original accountant accepted a position with another firm and left in early March. You have been asked to review the subsidiary inventory ledger record for Widget Tek Inc.’s main product for March.

Final Questions

In conversation with the president of Widget Tek Inc., you have learned that much of the company’s inventory consists of older Widget Tek Inc. models. These older models sell for less than the newer Widget Tek Inc. models, but customers strongly prefer the newer models. The company believes that the net realizable value of the older inventory is less than its value in the subsidiary inventory ledger.