As in Period of Price rising, current market price of the inventory will be higher than the previous market price on which inventory was purchased by the business. If using FIFO method the lower value of inventry will be rocorded then the value of inventory consumed will not meet the current market position. As a result all the Expenses shown in the financial statements will be lower, profit will be higher which may cause increase in income tax due and the ending inventry will show a higher value.
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Semester "Fall 2010"
"Subject Name (MGT101)"
This is to inform that Graded Discussion Board (GDB)
Has been opened according to the following schedule
Schedule
Opening Date and Time November 12 , 2010 At 12:01 A.M. (Mid-Night)
Closing Date and Time November 16 , 2010 At 11:59 P.M. (Mid-Night)
Note: No extra or bonus/grace period is available for attempting GBD.
Discussion Question
Give arguments in favor of following statement.
"FIFO method for inventory valuation may increase income tax due as well as showing true financial position of a business with respect to inventory during the period of rising prices."
Note: To avoid negative marking complete your comment within seventy five words.
Instructions:
Read the following instructions before giving your comments on GDB:
1. Use the font style "Times New Roman" and font size "12".
2. Your answer should be relevant to the topic i.e. clear and concise.
3. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
4. Books, websites and other reading material may be consulted before posting your comments but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0).
5. Obnoxious or ignoble answer should be strictly avoided.
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This case shows that the current market price is higher than the previous price rather the tax will be increased but the net profit according to FIFO method, the lower value counted of the current stock doesn't affect the market position and expense cost on the stock belower and profit will be higher. As the current stock is valued at recent most prices, the current assets of the company have the latest assessed values.
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As in Period of Price rising, current market price of the inventory will be higher than the previous market price on which inventory was purchased by the business. If using FIFO method the lower value of inventry will be rocorded then the value of inventory consumed will not meet the current market position. As a result all the Expenses shown in the financial statements will be lower, profit will be higher which may cause increase in income tax due and the ending inventry will show a higher value.
As in Period of Price rising, current market price of the inventory will be higher than the previous market price on which inventory was purchased by the business. If using FIFO method the lower value of inventry will be rocorded then the value of inventory consumed will not meet the current market position. As a result all the Expenses shown in the financial statements will be lower, profit will be higher which may cause increase in income tax due and the ending inventry will show a higher value.
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