Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cruise Brown, a representative of Nokia in America, recently read an article that reported that at least 100 of the largest 500 companies in the

Cruise Brown, a representative of Nokia in America, recently read an article that reported that at least 100 of the largest 500 companies in the United States were either adopting or considering to adopt the last-in first-out (LIFO) method for valuing inventories. The article stated that the firms were switching to LIFO to (1) neutralize the effect of inflation in their financial statements, (2) eliminate inventory profits, and (3) reduce income taxes. Mr. Brown wonders if the switch would benefit the company. Nokia manufactures and sells network equipment and currently uses the first-in first-out (FIFO) method of inventory valuation in its periodic inventory system. The company has a high inventory turnover rate, and inventories represents a significant portion of the assets. Mr. Rajeev Surf, president of Nokia world-wide in Finland, told Mr. Brown that the LIFO system is more costly to operate and will provide little benefit to companies. Mr. Brown intends to use the inventory method that is best for the company in the long run rather than selecting a method just because it is the current fad. Which method would you recommend to Mr. Cruise Brown? Why? Do you agree to the arguments of eliminating inventory profits and "reducing income tax" for this company? Do you agree to the argument that LIFO system is costly to operate with little benefit in this company?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Effective Use Of Teams For IT Audits

Authors: Martin Krist

1st Edition

0849398282, 978-0849398285

More Books

Students also viewed these Accounting questions

Question

=+ (c) Show that $ is countable if and only if L2 is separable.

Answered: 1 week ago

Question

1. In what ways has flexible working revolutionised employment?

Answered: 1 week ago