ACCT

LIFO

lowest net income, lowest inventory (rising costs)

FIFO

highest net income, highest inventory (rising costs)

Which inventory method is most accurate to physical flow

specific identification

Double Declining Balance

highest depreciation early
SL = 1/year x 2

Units of Production

Best matches usage
proceeds > BV = gain (credit)
proceeds < BV = loss (debit)

Straight Line

simplest and most common depreciation method

Percent of Sales

matches expenses to sales better (income statement)

Aging/% of AR

more accurate balance sheet

Accrual

GAAP requires

Cash Basis

records only when cash moves

Perpetual Inventory System

updates inventory continuously

Periodic Inventory System

updates only at period end

Which Inventory system is better for high volume low cost items

Periodic

Which Inventory system is better for low volume high cost items

Perpetual

Market Rate > Coupon Rate

discount bonds

Market Rate < Coupon Rate

premium bonds