Please reply to the following posts with a short response of your thoughts and option on their post.

Post #1

A company does not just specifically identify the units of inventory sold because they also need to include the costs associated with receiving the goods in which to sell. Some other costs can include shipping, storage, import duties, and insurance.

The First-In, First-Out (FIFO) method "assumes that inventory items are sold in the order acquired" (Wild & Shaw, 2022, p. 206). This means that whenever an item is sold, the cost of the earliest purchase price paid for the item is charged to cost of goods sold and leaves the costs from the most recent purchases in ending inventory (Wild & Shaw, 2022, p. 206).

The Last-In, First-Out (LIFO) method "assumes that the most recent purchases are sold first" (Wild & Shaw, 2022, p. 206). This means that the last cost charged when acquired are what is charged to the goods sold, leaving the cost of the earliest purchases assigned to inventory (Wild & Shaw, 2022, p. 206).

If costs are dropping, I think that the LIFO method of inventory valuation will yield the lower cost of goods sold because if the costs to the vendor are dropping, that would mean that the last in, would be the first out with a higher gross profit.

Post #2

A company does not just specifically identify the units of inventory sold because there is a cost that is associated with each unit of inventory. The first in first out method assumes that the oldest inventory will be sold first, whilst the last in first out method assumest that the newest inventory will be sold first. FIFO makes the most sense as a majority of company use their oldest inventory first, whereas LIFO doesn't make as much sense because companies would not leave their oldest inventory idle in stock. If the costs are dropping, utilizing LIFO would make the most sense as you would be yielding a higher profit margin from the latest products that you purchased as you bought them for a smaller price.

Post #3

A single-step income statement focuses on reporting the net income of the business using a single calculation. A multi-step income statement is more detailed and calculatesthe gross profit and operating income of the business using multiple calculations and an itemized breakdown. If a company has more expenses than gross profit, the result is a net business loss. A company can have a larger amount of gross profit, but if the cost to run the business is even higher, there is no net profit, there is a net loss.

Post #4

Multiple-step income statements consist to three parts: gross profit, income from operations (gross profit-operating expense), and net income (Wild et al, 2021). Single-step income statement subtracts expenses (COGS) from total revenues (Wild et al, 2021).

The multi-step method is a lot more detail than the single step format. Companies using the multi-step method can have a positive gross profit and still have a net loss due to expenses being more than gross profit. This method includes categorized selling and general expenses of things such as salaries and advertising expenses (Wild et al, 2021).