Peer review and response to professor

by

Business Finance

MUST BE 6+ SENTENCES PER RESPONSE STAY ON TOPIC BE POSITIVE AND DO NOT COMMENT ON GRAMMAR ERRORS!!

PROFESSOR

Sarah, Thank you for getting us started. This is a very complex accounting process to calculate 🙂 but not so hard to understand. Don’t google this. Take a few minutes and think about this.Look at the big picture.

What do we assume about prices generally? Are they rising or declining? Well, this week, gas prices are certainly rising! Have you noticed?

So generally when we talk about inventory costing methods and the effects on taxable income, we are thinking of rising prices. LIFO stands for Last price in, First price out. Notice that the actual reality of the item sold is not relevant. Think of it as the accountant isin the back room without a window. He doesn’t know what is happening out in the warehouse. All he gets is a piece of paper telling him how many items/ units were sold. How does he determine the price?

It depends! It depends on which costing assumption/ method you are iusing.answerThank you for getting us started. This is a very complex accounting process to calculate 🙂 but not so hard to understand. What do we assume about prices generally? Are they rising or declining? Well, this week, gas prices are certainly rising! Have you noticed?

So generally when we talk about inventory costing methods and the effects on taxable income, we are thinking of rising prices. LIFO stands for Last price in, First price out. Notice that the actual reality of the item sold is not relevant. Think of it as the accountant is in the back room without a window. He doesn’t know what is happening out in the warehouse. All he gets is a piece of paper telling him how many items/ units were sold. How does he determine the price?

Fortunately he has a record of the prices for each of the purchases/ orders/ items. If he’s using LIFO he will use the most recent prices for item. He will need prices for each of the items sold. The prices for the most recent purchase, the Last item In, will be the prices he uses to record the cost of the good sold.

In times of rising prices, will the COGS using LIFO be higher or lower than using FIFO prices? What will be the effect of this on Net Income, on Net Taxable Income?

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CLASSMATE

LIFO stands for last in, first out, which is how the inventory method works. I would suggest this because the use of LIFO will result in less taxable income and less income tax payments than FIFO. This will help over a period of time because as costs increase it will lower our tax payments significantly. Another reason would be because it will help us match cost with sales. With the recent cost LIFO will match the income statement with recent sales revenues. The last costs in will be the first costs out of inventory and onto the income statement as the cost of goods sold. When evaluating inventory sales LIFO assumes that the most recently acquired inventory is the inventory sold. The biggest benefit of LIFO is a tax advantage. During times of inflation LIFO results in a higher cost of goods sold and a lower balance of remaining inventory. A higher cost of goods sold means lower net income which results in a smaller tax liability.

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SOCIOLOGY

CLASSMATE

Hello Professor and Class,

For ts week’s discussion I chose Hard Work and Education. I chose Hard Work and Education because those are key things that you need to not be walked over by the next person. For example, from the strayer stories, If Ron did not have the knowledge to decide to plant his own garden with fresh vegetables and fruits for his community he would not be helping the people he is helping today. When Ron received the arrest warrant he took that experience and it made him work harder. Now he is know in many places for what he has done. To conclude my post, having an education and being hard working can get you places you’ve never thought of.

Thank you for reading my post.