Assume that you are an accountant at a local retailer and your boss asks you to explain the financial statement impact of inventory costing methods. In particular, she is interested in whether the company should use the FIFO or LIFO method. She would like to use the method that results in the highest net income, the highest inventory balance, and the lowest taxes.
Required
Assuming that the company is experiencing rising prices, explain the effects of using the LIFO and FIFO methods on income, inventory, and taxes. Can your boss get all that she wants?