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Comparing Inventory Methods Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. a. In each dropdown that follows,
Comparing Inventory Methods
Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results.
a. In each dropdown that follows, select the correct sign [less than ( <), greater than (> ), or equal (=)] for each comparison, assuming periods of rising prices.
1. FIFO inventory | LIFO inventory | |
2. FIFO cost of goods sold | LIFO cost of goods sold | |
3. FIFO net income | LIFO net income | |
4. FIFO income taxes | LIFO income taxes |
b. Why would management prefer to use LIFO over FIFO in periods of rising prices?
- Income shown on the companys tax return would be lower if LIFO rather than FIFO is used.
- Income shown on the companys tax return would be higher if LIFO rather than FIFO is used.
- Cost of goods sold shown on the companys income statement would be lower if LIFO rather than FIFO is used.
- Dividends shown on the companys financial statements would be higher if LIFO rather than FIFO is used.
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