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Methods of accounting: FIFO versus LIFO

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Explain how the choice of one of the following

accounting methods over the other raises or

lowers a company's net income during a period of

continuing inflation.

(a) Use of FIFO instead of LIFO for inventory costing.

(b) Use of a 6-year life for machinery instead of a

9-year life.

(c) Use of straight-line depreciation instead of accelerated

declining-balance depreciation.

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Solution Summary

The following accounting methodology questions are explained to you concerning; are over the other raises or

lowers a company's net income during a period of

continuing inflation.

(a) Use of FIFO instead of LIFO for inventory costing.

(b) Use of a 6-year life for machinery instead of a

9-year life.

(c) Use of straight-line depreciation instead of accelerated

declining-balance depreciation.

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a. Fifo will have higher income, because if the amount put in is lower at the end of the cycle (if the ...

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