How would a change in LIFO/FIFO flow through the financial statements?
Hi Guys,
I was wondering if you could really break this problem in details for me for Lifo V. Fifo and their flow through the financial statements.
Thanks so much!
Inventory methods affect your cost of goods sold and the assets on the balance sheet. If prices are increasing, under FIFO you're going to have a lower cost of goods sold than under LIFO, meaning higher gross margin, higher income taxes and likely higher net income. Assets on the balance sheet will be higher because you'd be keeping the higher cost items and assuming you sold the lower cost items. The opposite of all of that is true in a decreasing cost environment. This is like Acct 101 dude.
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