=+A6-4 Lifo and inventory flow Jack: Carole, can you explain what’s going on here with these monthly statements?

Carole: Sure, Jack. How can I help you?

Jack: I don’t understand this last-in, first-out inventory procedure. It just doesn’t make sense.

Carole: Well, what it means is that we assume that the last goods we receive are the first ones sold. So the inventory is made up ofthe items we purchased first.

Jack: Yes, but that’s my problem. It doesn’t work that way! We always distribute the oldest pro¬

duce first. Some ofthat produce is perishable! We can’t keep any ofit very long or it’ll spoil.

Carole: Jack, you don’t understand. We only assume that the products we distribute are the last ones received. We don’t actually have to distribute the goods in this way.

Jack: I always thought that accounting was supposed to show what really happened. It all sounds like “make believe” to me! Why not report what really happens?

Respond to Jack’s concerns.