Suppose you are the controller of a company that sells inven
Suppose you are the controller of a company that sells inventory.Suppose, too, that the economy currently enters a period of highinflation. Although profits are higher this year than last year, yourealize that the cost to replace inventory is also higher. You are awarethat many companies are changing to the Last-In First-Out (LIFO)inventory method to save on taxes in the current year; however, you areconcerned that when prices eventually decline, the LIFO method willresult in higher taxes. Because declining prices are usually equatedwith economic recession, it is likely that the higher taxes will be paidwhen revenues are declining. What factors should you consider beforemaking a change to LIFO? Based on the above considerations, what wouldyou recommend?