Inventory Evaluation and Cost of Goods Sold
Which is better
Choose either LIFO or FIFO as a method of inventory valuation, and thoroughly discuss why you feel the chosen method is better than the other. What are the advantages and disadvantages of your chosen method? How does your chosen method affect the financial statement? Why did you select the method you did? 150WORDS
Part 2
Identify and explain the four methods of assigning costs to ending inventory and cost of goods sold. What are the differences and similarities between each method? 150WORDS
Answer preview
FIFO Inventory evaluation method assumes the first goods to be added in the inventory first are removed first. FIFO is better than LIFO because fewer inventory layers are required, which reduces record-keeping, unlike in LIFO, where more inventory layers are essential to track in the system. During inflation, the cost of goods sold decreases under FIFO since the first items on the inventory are less expensive. This leads to reports of high profits, which translate to large amounts of income tax soon (Simeon, and John, 2018). In LIFO…
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