CASE 3-6 Accounting Standards General Motors and Ford use the last-in, first-out (LIFO) method to value their inventories. Honda (of Japan) and Daimler-Benz (manufacturer of Mercedes-Benz of Germany) use the first-in, first-out (FIFO) method. Under LIFO, recent costs are expensed as cost of goods sold; under FIFO, older costs are expensed as cost of goods sold. Required: a. Given the income statement effects of LIFO versus FIFO. how will the balance sheet inventory amounts differ between General Motors and Ford versus Honda and Daimler-Benz? In other words, will inventory be reported amounts representing recent costs or older historical costs? In your opinion, which balance sheet amounts would be more useful to financial state- ment users in making decisions to buy or sell shares of a com- pany's stock? b. Discuss the concept of conservatism. In your opinion, which is more conservative, General Motors and Ford or Honda and Daimler-Benz? Explain.
CASE 3-6 Accounting Standards General Motors and Ford use the last-in, first-out (LIFO) method to value their inventories. Honda (of Japan) and Daimler-Benz (manufacturer of Mercedes-Benz of Germany) use the first-in, first-out (FIFO) method. Under LIFO, recent costs are expensed as cost of goods sold; under FIFO, older costs are expensed as cost of goods sold. Required: a. Given the income statement effects of LIFO versus FIFO. how will the balance sheet inventory amounts differ between General Motors and Ford versus Honda and Daimler-Benz? In other words, will inventory be reported amounts representing recent costs or older historical costs? In your opinion, which balance sheet amounts would be more useful to financial state- ment users in making decisions to buy or sell shares of a com- pany's stock? b. Discuss the concept of conservatism. In your opinion, which is more conservative, General Motors and Ford or Honda and Daimler-Benz? Explain.
Chapter10: Inventory
Section: Chapter Questions
Problem 4MC: If goods are shipped FOB destination, which of the following is true? A. Title to the goods will...
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