What method of inventory valuation is used by Shafer

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Question - After analyzing financial statements of two companies of same industry: Shafer company and Margo company. Both are paying income taxes on their earnings, both have large inventories and replacement cost of their product that are on the rise, over the years. A note to financial statements disclosed that Shafer company is cost is shown far below to its replacement cost and Margo inventory is shown at a cost close its current replacement cost.

Required - Answer the following questions and explain the reasoning behind the answer.

a. What method of inventory valuation is probably used by Shafer and Margo?

b. Which company probably has been reporting the higher net income, support with figures?

Reference no: EM132838857

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