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The following example was provided to encourage the use of the LIFO method. In a nutshell, LIFO subtracts inflation from inventory costs, deducts it from

image text in transcribedimage text in transcribed The following example was provided to encourage the use of the LIFO method. In a nutshell, LIFO subtracts inflation from inventory costs, deducts it from taxable income, and records it in a LIFO reserve account on the books. The LIFO benefit grows as inflation widens the gap between current-year and past-year (minus inflation) inventory costs. This gap is: Explain what is meant by the LIFO reserve account. How does LIFO subtract inflation from inventory costs? Explain how the cash flow of $174,400 in this example was computed. Explain why this amount may not be correct. eTextbook and Media Why does a company that uses LIFO have extra cash? Explain whether this situation will always exist

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