Selection of an Inventory Method As controller of a widely held public company, you are concerned with making the best decisions for the stockholders. At the end of its fi rst year of operations, you are faced with the choice of method to value inventory. Specifi c identifi cation is out of the question because the company sells a large quantity of diversifi ed products. You are trying to decide between FIFO and LIFO. Inventory costs have increased 33% over the year. The chief executive offi cer has instructed you to do whatever it takes in all areas to report the highest income possible.

Required 1. Which method will satisfy the chief executive offi cer?

2. Which method is in the best interest of the stockholders? Explain your answer.

3. Write a brief memo to the chief executive offi cer to convince him that reporting the highest income is not always the best approach for the shareholders.

AppendixLO1