Accounting & the 3 Statements
LIFO vs. FIFO: in an inflationary environment, which produces higher net income, higher taxes, and higher inventory on the balance sheet?
Model answer
In inflation (rising input costs): FIFO (first-in, first-out) expenses the OLDEST, cheapest units to COGS → lower COGS → higher gross profit, higher net income, and therefore higher taxes; ending…
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