Purchase Solution

Inflation - inventory cost flow method

Not what you're looking for?

Ask Custom Question

During a period of inflation (increasing costs of goods), which inventory cost flow method would provide the highest ending inventory balance? How would this affect the net income of the company? Explain why it would, or would not, be ethical to select the cost flow method that reports the highest net income?

Purchase this Solution
Solution Summary

During a period of inflation (increasing costs of goods), which inventory cost flow method would provide the highest ending inventory balance? How would this affect the net income of the company? Explain why it would, or would not, be ethical to select the cost flow method that reports the highest net income?

Solution Preview

Solution attached.

During a period of inflation (increasing costs of goods), which inventory cost flow method would provide the highest ending inventory balance? How would this affect the net income of the company? Explain why it would, or would not, be ethical to select the cost flow method that reports the highest net income?

When cost of goods tend to increase as in the case of inflation, the latest purchased goods will have a higher ...

Solution provided by:
Radhika Lakshmi, MPhil
Education
  • MPhil, Madurai Kamaraj University
  • MCom, Annamalai University
  • IATA, International Air Transport Association
Recent Feedback
  • "Great explanations on how the answers were obtained."
  • "Love the way she explains everything step by step."
  • "Solutions were thoroughly explained."
  • "Excellent explanations of how problems are solved"
  • "Thanks"
Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Inventory Valuation and the Effect on Profit.

    Inventory valuation methods impact the valuation of inventory and the cost of goods sold. There by it affects the balance sheet, income statement and statement of cash flow.

  • Inventory Issues: Intermediate Accounting

    315935 Inventory Issues: Intermediate Accounting 422. During periods of inflation this cost flow assumption will generally mean less reported profits and less taxable income. FIFO LIFO 423.

  • Managerial Accounting Problems

    Using the periodic inventory system, compute net income using the FIFO method and the LIFO method for costing inventory. Which alternative produces the larger cash flow?

  • Income Summary and Inventory

    The above methods impact the valuation of inventory and cost of goods sold. There by it affects balance sheet, income statement and statement of cash flow.

  • LIFO vs. FIFO Valuing Inventory

    LIFO buffers the effects of inflation because of conservative profits. FIFO more closely depicts the physical movement of goods. FIFO assumes that the cost of items sold in a period reflects the oldest cost in inventory just before sale.

  • EBBD Excel spreadsheet

    each product • Annual holding cost rate (4%) • Max cap (190) • Inflation forecast Note that the annual holding cost rate of 4% results in a quarterly holding cost rate of 1%; the latter is used in the computations since the quarterly forecast demand

  • Inventory identification methods

    . -- Using the periodic inventory system, compute net income using the FIFO method and the LIFO method for costing inventory. Which alternative produces the larger cash flow?

  • Sample of inventory cost flow assumptions

    Also, LIFO produces highest cash ending balance COGS is highest or lowest ending inventory in this method. The samples of inventory cost flow assumptions are examined.

  • Current Inventory Cost Basis adjusted for inflation using the CPI

    Its uses the periodic system and the FIFO inventory method. On January 1, 2001 the inventory consisted of 20,000 units at $2 a unit.

View More Related Solutions