A company should determine cost for inventory purposes by the inventory cost flow method most clearly reflecting its periodic income. Required:
(1) Explain the fundamental cost flow assumptions of the average cost. FIFO and LIFO inventory cost flow methods.
(2) Discuss the reasons a company uses LIFO in an inflationary economy. ]
(3) Where there is evidence that the utility of goods in their disposal in the ordinary course of business will be lest than cost . Explain the proper accounting treatment and under what concept that treatment is justified?