Explain the effect on financial reporting of choice of fifo

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Reference no: EM132983233

Steele Security Services sells home security and surveillance systems. At the start of the financial year the manager decides to use the FIFO method instead of the weighted average cost flow method to record the cost of "Spy Eye", the most popular model of camera used in their home security service. This is because he expects the cost price of the manufacture and import costs to increase over the financial year.
At the end of the year, the owner of the firm wants the manager to conduct a stocktake of the "Spy Eye" camera as he is concerned about two things: the amount of employee theft; and the quality of the newer batch of the imported cameras which will be reflected in the sales return figures.

Required:

Problem 1: Your task is to explain the effect on the financial reporting of his choice of FIFO as a cost flow method and, the effects of the stocktake on the financial reporting of Steele Security Services.

Reference no: EM132983233

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