Three large mass merchandisers use the following methods to value ending inventory : Company Xweighted average cost
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Company X—weighted average cost
Company Y—first-in, first-out (FIFO)
Company Z—last-in, first-out (LIFO)
The cost of inventory has steadily increased over the past ten years of the product life. Recently, however, prices have started to decline slightly due to foreign competition.
Required
1. Will the effect on net income of the decline in cost of goods sold be the same for all three companies? Explain your answer.
2. Company Z would like to change its inventory costing method from LIFO to FIFO. Write an acceptable note for its annual report to justify the change.
Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
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Related Book For
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
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