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MGT101, GDB Discussion Fall 2010 due date November 16, 2010

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.

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Comment by Shamil Khan on November 12, 2010 at 11:50pm
thanks dare2die
Comment by Shamil Khan on November 12, 2010 at 9:50pm
For taxation purposes, FIFO assumes that the assets that are remaining in inventory are matched to the assets that are most recently purchased or produced. Because of this assumption, there are a number of tax minimization strategies associated with using the FIFO asset-management and valuation method.
Comment by Shamil Khan on November 12, 2010 at 1:06am
Just as a hint we've to determine if the price of the inventory being used is going up or down. This is crucial in deciding whether FIFO is appropriate for the organization. If prices are going up, the FIFO method works. If not, it may be wise to consider other options.

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