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Essay / Research Paper Abstract
This 7-page paper answers various questions about accounting standards and rules. Bibliography lists 2 sources.
Page Count:
7 pages (~225 words per page)
File: AS43_MTaccounsy.rtf
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Unformatted sample text from the term paper:
Inventory is defined as assets either intended for sale, are in the process of being produced for sale, or those that are being used in the
production of goods (Investopedia Staff, 2010). Even with the basic definition, there are many different ways in which inventory can be valued. No one way is better than another; but
some are better, depending on the inventory in question. The best-known valuation methods are FIF (First-In, First-Out) and LIFO (Last-In, First Out). FIFO assumes that the first unit coming into
the inventory is the first sold, whereas LIFO involves the last unit making its way into the inventory is sold first (Investopedia Staff, 2010). FIFO is typically a better method
to use if were interested in the value of the ending inventory (Investopedia Staff, 2010). Furthermore, FIFO increases net income (inventory still around is used to value cost of goods
sold, meaning a higher net income) (Investopedia Staff, 2010). Increasing net income means an increase in the amount of taxes a company has to pay (Investopedia Staff, 2010).
LIFO, on the other hand, should be used if the company isnt interested in the value of ending inventory, or if the company isnt
interested in a higher net income (Investopedia Staff, 2010). Granted the lower net income will result in lower taxes, but it will also not look too good on a balance
sheet. There are other inventory methods that can be used as well. Average cost, for example, takes the weighted average of all units
available for sale during the accounting period (Investopedia Staff, 2010). That figure is then used to determine the value of cost of goods sold and ending inventory (Investopedia Staff, 2010).
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