Accounting

Anonymous
timer Asked: May 2nd, 2014
account_balance_wallet $5

Question Description

With increasing prices, why would a tax accountant prefer the last in, first out method but CEO prefer first in, first out? Why important?

Tutor Answer

Bilal_Mursaleen
School: Purdue University

The “Last In, First Out” inventory method has been hotly debated at the federal level. Congress has threatened to outlaw the method as the Internal Revenue Service introduces laws and requirements that make using the LIFO method inconvenient at best. Using the LIFO method of inventory means that when you count the cost of goods sold, you use the current price rather than whatever price you paid for the specific inventory in stock. If the prices of those goods go up from your initial purchase, your cost of goods sold will read higher, thereby reducing your profits and, as a result, your tax burden and access to credit. If the costs go down, your profits may be artificially inflated.


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Anonymous
Top quality work from this guy! I'll be back!

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