Respond to the following questions:

1. Is Golf Challenge's change from LIFO to FIFO ethical? Consider whether such a change would be misleading to investors.
2. Under what type of circumstance should a company be permitted to change inventory costing methods?

Feel free to share a personal experience with the class.

Hint: The Ethics Challenge assumes inventory costs are rising. As you learned in the chapter, FIFO results in the higher cost of the most recent inventory purchases remaining on the balance sheet, in the inventory asset account. The lower cost of the earliest inventory purchases are recorded as expense in cost of sales on the income statement. Under LIFO, however, the higher cost of the most recent inventory purchases are recorded as expense, reducing net income. No wonder a switch from LIFO to FIFO is beneficial for Golf Challenge!