Question
Pacific Equipment, which sells industrial handling equipment, values its inventory using LIFO. During the current year, Pacific Equipment has experienced a significant increase in the
Pacific Equipment, which sells industrial handling equipment, values its inventory using LIFO. During the current year, Pacific Equipment has experienced a significant increase in the cost of its inventory items. Although the net income for the current year has been fairly good, Lynne Jamison, the company president, wishes it was higher because the company has been considering borrowing money to purchase a new building. Mrs. Jamison has heard that a companys choice of inventory valuation method can affect the companys net income. Mrs. Jamison has asked the controller, Lisa Adams, to explore the possibility of changing the companys inventory valuation method. If you were in Lisas position, how would you respond to Mrs. Jamison? Address potential ethical implications and applicable accounting principles in your answer.
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