In accounting does the LIFO method change. Sometimes it means the oldest is first, sometimes it...

In accounting does the LIFO method change. Sometimes it means the oldest is first, sometimes it means the most recent?

Solutions

Expert Solution

Last in First Out(LIFO)Method :

In this method, the materials received last are issued first. Thus, under this method, the price of the last purchase is used for pricing the materials until the entire quantity from the lot is used up. After this , the price of the just previous purchase lot becomes the issue price.

Advantages:

1) Since materials are charged at recent prices, cost of production reflects current market trend and the price quoted for products become competitive

2) Being an actual cost method, it ensures complete recovery of material cost from production.

3) It is more useful during the period of rising prices, because it does not inflate profits

4) It is suitable when purchases are not too many and the prices are either steady or are rising.

Demerits:

1) when there is high fluctuation in rates, calculation become complicated

2) The work of pricing is delayed, if the latest receipt rate is not readily available

3) Closing stock valued at cost which does not represent current conditions.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Sometimes a business entity may change its method of accounting for certain items. It may classify...

Sometimes a business entity may change its method of accounting for certain items. It may classify the change as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. The following are three situations faced by Hyde Company relating to accounting changes. Situation I Hyde determined that the depreciable lives of its fixed assets are presently too long to fairly match the cost of the fixed assets with the revenue produced. Hyde decided at...

if LIFO change to FIFO method, how it change to book value of company

The Pyramid Company has used the LIFO method of accounting for inventory during its first two...

The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2019 and 2020. At the beginning of 2021, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2019–2021. The income tax rate for all years is 25%. Income before Income Tax Using Average Cost Method Using LIFO Method Difference Income Tax Effect Difference after Tax...

The Pyramid Company has used the LIFO method of accounting for inventory during its first two...

The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2016 and 2017. At the beginning of 2018, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2016–2018. The income tax rate for all years is 40%. Income before Income Tax Average Cost Method LIFO Method Difference Income Tax Effect Difference after Tax 2016 $...

Judgment Case 20-10. Sometimes a business entity will change its method of accounting for certain items....

Judgment Case 20-10. Sometimes a business entity will change its method of accounting for certain items. The change may be classified as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. Listed below are three independent, unrelated sets of facts relating to accounting changes. Situation I: A company determined that the depreciable lives of its fixe assets are presently too long to fairly match the cost of the fixed assets with the revenue...

C 22-10 Researching GAAP AICPA Adapted Sometimes a business entity may change its method of accounting...

C 22-10 Researching GAAP AICPA Adapted Sometimes a business entity may change its method of accounting for certain items. It may classify the change as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. The following are three situations faced by Hyde Company relating to accounting changes. Situation I Hyde determined that the depreciable lives of its fixed assets are presently too long to fairly match the cost of the fixed assets with...

Accounting for a change from FIFO to LIFO will include: Select one: a. An adjustment to...

Accounting for a change from FIFO to LIFO will include: Select one: a. An adjustment to Retained Earnings, but not a Restatement of prior-year presented financial statements. b. A Restatement of prior-year presented financial statements, but not an adjustment to Retained Earnings. c. Both an adjustment to Retained Earnings and a Restatement of prior-year presented financial statements. d. Neither an adjustment to Retained Earnings nor a Restatement of prior-year presented financial statements.

LIFO METHOD

Month Amount Price Paid Nov 7 100 books $18.00 per Nov 21 100 books $18.00 per Nov 28 125 books $18.25 per Dec 4 150 books $18.50 per Dec 7 150 books $19.25 per Dec 15 150 books $20.00 per

Company ABC uses the last-in, first-out (LIFO) dollar value retail inventory method. It adopted this method...

Company ABC uses the last-in, first-out (LIFO) dollar value retail inventory method. It adopted this method at the beginning of this year. The cost index for the year was 1.12. Below is information for the first year. Cost Retail BI 1082.0 1542.0 Net purchases 3462.4 5088.6 Net Sales 0.0 4579.7 Ending inventory at retail is: Answer The cost to retail conversion for beginning inventory is (round to at least 3 decimal points): Answer The cost to retail conversion for the...

With equity method of accounting, equity investment means there is controlling ownership and revenue increased the...

With equity method of accounting, equity investment means there is controlling ownership and revenue increased the investment account and didvidends reduce the equity account. How does this relate with consolidation?

Subjects