LIFO versus FIFO — matching and balance sheet impact Proponents of the LIFO inventory cost-flow assumption argue that this costing method is superior to the alternatives because it results in better matching of revenue and expense.
Required:
a. Explain why “better matching” occurs with LIFO.
b. What is the impact on the carrying value of inventory in the balance sheet when LIFO rather than FIFO is used during periods of inflation?
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