LIFO vs. FIFO

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1. LIFO vs. FIFO

   The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods?

   Guided Response:
   Analyze several of your peers’ posts. Let at least two of your peers know if a company is better off it switches from a LIFO method to a FIFO method? Explain your reasoning.

2. Depreciation

   A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset. Your client has just purchased a piece of equipment for $100,000. Explain the concept of depreciation. Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?

   Guided Response:
   Let at least two of your peers know if a company would use an accelerated depreciation method for their financial statements or their tax returns. Why do you believe this would be the case?

Exercise Assignment
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Inventory

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