The Effects of LIFO Inventory Valuation
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42. The use of LIFO during a long inflationary period can result in:
A. A net increase in income tax expense.
B. An inflated balance sheet.
C. Significant cash flow advantages over FIFO.
D. A reduction in inventory turnover over FIFO.
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Solution Summary
This solution discusses the effects of using the LIFO method on inventory valuation and on net income.
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The flow assumption with the Last-In, First-Out inventory valuation method is that the latest units purchased are sold, leaving units purchased earlier in inventory. During inflationary times, the latter-purchased units will cost more than the ...
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