LIFO VERSUS FIFO: UPDATING WHAT WE HAVE LEARNED Nicole Thorne Jenkins Doctoral Student in Accounting Morton Pincus Associate Professor of Accounting College of Business Administration The University of Iowa 108 PBAB Iowa City‚ IA 52242-1000 U.S.A. 319/335-0915 FAX 319/335-1956 morton-pincus@uiowa.edu September 1998 (version 1.2) LIFO VERSUS FIFO: UPDATING WHAT WE HAVE LEARNED 1.0 INTRODUCTION The statutory mandate in U.S. tax law that firms using the last-in first-out (LIFO) inventory
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of inventory that cost a total of $190. During June‚ Amazon purchased and sold goods as follows: June 8 Purchase 30 units @ $20 June 14 Sale 25 units @ $40 June 22 purchase 20 unit @ $22 June 27 Sale 30 unit @ $40 Requirements: Under the FIFO and LIFO method 1. How much is Amazon’s cost of goods sold 2. How much is Amazon’s gross profit or loss 3. Journalize all Amazon’s inventory transactions for June. 4. Which method maximizes gross profit? Q2: Collins Industries’ inventory records show the following
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FIFO and LIFO accounting Methods are accounting techniques used in managing inventory and financial matters involving the amount of money a company has tied up within inventory of produced goods‚ raw materials‚ parts‚ components‚ or feed stocks. FIFO stands for first-in‚ first-out‚ meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact newest physical object has been tracked and sold; this is just an inventory technique. LIFO stands for last-in
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SUMMARY For over 70 years‚ US taxpayers have been able to value the cost of their inventories using the last-in‚ frst-out inventory method of accounting (LIFO). In general‚ to use LIFO for federal income tax purposes‚ taxpayers must also use LIFO for fnancial reporting purposes (herein referred to as the LIFO conformity requirement). The use of LIFO for fnancial reporting purposes is not permitted under International Financial Reporting Standards as promulgated by the International Accounting Standards
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Student Name: ZHANG QIWEI Student ID Number: B414498 Arguments for and against LFO abolition in the US What are the arguments in favour of retaining LIFO? The arguments are being made on a number of different grounds so be clear to separate these out. What are the arguments in favour of the US abolishing LIFO? Should decisions on matters such as this be made on the basis of what is the most appropriate from an accounting perspective (i.e. principles) or from the perspective of the impact of
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LIFO‚ last-in-first-out and FIFO‚ first-in-first-out the two most common inventory accounting methods. The choice of the method of inventory accounting by a small business can directly impact its balance sheet‚ income statement‚ and statement of cash flows. Not only do companies have to track the number of items sold‚ but they have to track the cost of each item. These two methods are ways in which they can do that. Each will have a different effect on their financial statements. How is Inventory
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different batches of production. This makes the calculation of unit cost difficult as it varies for different batches of production. | 4 LIFO [ LAST IN FIRST OUT ] | ADVANTAGES | DISADVANTAGES | * The inventory is issued to production at the most recent prices paid to acquire them. * The profit is usually understated in LIFO which causes to impose a lower amount of tax on the profit. * Raw materials are issued to production on the latest prices in a manufacturing firm
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Reasons why the LIFO method should not be repealed in the context of business tax reform In response to proposals by the Obama Administration to repeal the LIFO inventory method as part of the Administration’s budget proposals for Fiscal Years 2010-2013‚ the LIFO Coalition‚ which represents trade associations and business of every size and industry that employ the LIFO method‚ provided reasons why the LIFO method should not be repealed. The reasons for opposing the repeal of the LIFO inventory
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As for the results of the LIFO questionnaire‚ my dominating behavioral style in both favorable and unfavorable conditions is Controlling. This means that I am quick to act‚ competitive‚ confident‚ persuasive‚ competitive‚ perfectionist‚ looking for constant development and new opportunities‚ taking the initiative‚ valuing time and having certain standards of quality. Acting according to my values and in compliance with long term goals‚ showing competence and doing my best to achieve goals are important
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The dollar value LIFO method is another approach used for inventory valuation‚ it follows the last in first out but take into consideration the impact of inflation. The dollar value LIFO method is derived from the LIFO method and it’s designed to overcome the main problem of LIFO method which is liquidation. The dollar value LIFO method groups all type of goods in the inventory in a pool and the pool is measured by the total dollar amount instead of physical quantity. The balance sheet view differ
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