The uncertain future of LIFO* The uncertain future of LIFO This paper was authored by Christine Turgeon, a partner; Scott Rabinowitz, a director; Helen Poplock, a director; and Sean Pheils, a senior associate with PricewaterhouseCoopers’ Washington National Tax Services (WNTS) practice. For over 70 years, US taxpayers have been able to value the cost of their inventories using the last-in, first-out inventory method of accounting (LIFO). In general, to use LIFO for federal income tax purposes
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KASHFIA TABASSUM AHMED ROLL: RH-42 SECTION A IBA BBA 2OTH BATCH ACCOUNTING SUBMITTED TO: MELITA MEHJABEEN SUBMITTED ON: 30/ 04/ 2012 FIFO [ FIRST IN FIRST OUT ] | ADVANTAGES | DISADVANTAGES | * If the business trades perishable goods with the use of FIFO it can avoid obsolescence of stock. * Closing stock valuation is done upon the most recent prices paid for stock which takes into account the rate of inflation. * The method is more realistic as the inventory is
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Directions Read the “Harnischfeger Corp” case study and answer the following questions. Submit your completed assignment no later than the last day of Week 2. 1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. After reviewing the accounting policies of other corporations in similar industries, Harnischfeger decided to adjust their depreciation method. Instead of continuing to use the accelerated method for depreciating their US
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journals. This result in an updated inventory system in which the organization at any point knows how much of a product is present in inventory and how much has been sold. It also provides the organization with the value of the assets. Advantages of Perpetual system Advantages of Perpetual Inventory system are that a complete and reliable check on stores at any point can be obtained. While the inventory data is being collected, the company continues to work normally. Because the stock figures are directly
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CH.8 -Inventory Classification: * Merchandise inventory- only inventory account that appears in the financial statements. -Perpetual inventory system- continuously tracks changes in the Inventory account. Records all purchases and sales of goods directly in the Inventory account as they occur. * Perpetual inventory overages and shortages generally represent a misstatement of cost of goods sold. Debi t Inventory over or short, credit Inventory. -Periodic inventory system- records all
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would not recommend. Why or Why not? 3. Comment on this statement, "A poor location may be such a liability that even superior Retailers cannot overcome it" Is it always true, give Examples 4. What is Trading Area Over-Lap? Are there any advantages to Chain Retailers having some overlap amongst its various stores? Why or Why not? 5. If a retail area is acknowledged to be "SATURATED", what does this signify for existing retailers? For prospective retailers considering this area? 6
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this would ensure that they are within the guidelines of their covenants. 1. If you were Kathy Hutton, what would you do? Due to the fragile nature of Summit Distributors business, we would agree with Dave Flander’s suggestion of going from LIFO to FIFO. There are a few negatives and positives with this decision. First, violating any of the loan covenants would alert the bank, and any future dealing with them would incur a 50 basis point increase on the lending rate (.50%). Also because
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. . . . . . aTV $250 290 300 $840 $550 Weighted Average (2) $550 280b $270 $560e LIFO (3) $550 300c $250 $540f (1) $550 250a $300 $590d set 1 costs $250. TV sets costs $280 ( cTV set 3 costs $300. bAverage dTV $840/3). sets 2 and 3 cost $290 $300 $590. average TV sets cost 2 $280 $560. fTV sets 1 and 2 cost $250 $290 $540. eTwo LAST-IN, FIRST-OUT The last-in, first out (LIFO) cost flow assumption assigns the costs of the latest units acquired to the withdrawals and
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of rising prices, FIFO reports the highest net income” (Kimmel et al, 2007, p. 278). FIFO is most recognized for the reason that it includes up to date purchases and, as such, more precisely reflects the price of substitutions. Last-in, First-out (LIFO) is an inventory method that assumes the last items produced or purchased in the inventory are the first ones sold. This inventory method is acceptable under the U.S.
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this concern by reviewing some of the rewards and deficiencies, as well as try to differentiate the IFRS standards from the US GAAP standards. Table of Contents Abstract 2 Table of Contents 3 Introduction 4 2.0 Advantages of adapting IFRS 5 2.1 Better Comparison 5 2.2 Flexibility 6 3.0 Disadvantages of adapting IFRS 6 3.1 Global Unacceptability 6 3.2 Manipulative 7 3.3 Cost 7 3.4 Increased Taxes 7 4.0 Conclusion 8 References 10
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