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LIFO vs. FIFO Valuing Inventory

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Please see the attached inventory information.

(a) Why might Prab Robots, Inc., use two different methods for valuing inventory?

(b) Comment on why Prab Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO.

(c) Why does the LIFO liquidation reduce operating costs?

(d) Comment on whether Prab would report more or less income if it had been on a FIFO basis for all its inventory.

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Provides a solution to each of the valuing inventory questions.

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(a) At times it is desirable for a company to use LIFO for tax purposes to obtain a cash flow advantage when inventory costs are rising. This cash flow advantage results from decreased tax payments. LIFO buffers the effects of inflation because of ...

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