Reference no: EM132740654

Problem 1: Which inventory costing method should a company use when it wants to minimize taxes? Does your response depend on whether prices are rising or falling? Explain your answers.

Problem 2: The president of Ace Retail commented on the company's new controller: "The woman is brilliant! She has shown us how we can maximize our income and at the same time minimize the amount of taxes we have to pay the government. Because the cost to purchase our inventory constantly goes up, we will use FIFO to calculate cost of goods sold on the income statement to inimize the amount charged to cost of goods sold and thus maximize net income. For tax purposes, however, we will use LIFO because this will minimize taxable income and thus minimize the amount we have to pay in taxes." Should the president be enthralled with the new controller? Explain your answer.