Question: Taylor company, a household appliances dealer, purchases its inventories from various suppliers. Taylor has consistently stated its inventories at the lower of cost (FIFO) or market and uses the gross price method to record discounts.
Required: 1. Taylor considering alternative methods of accounting for the purchase discounts it takes when paying its suppliers promptly. From a theortical standpoint, discuss the acceptability of each of the following methods:
a. income when payments are made
b. reduction of COGS fro period when payments are made
c. direct deduction of purchase cost
2. Identify the effects on both the balance sheet and the income statement of a company using the LIFO inventory method instead of the FIFO method over a substantail time period when purchase prices of househodl applicances are riseing. State why these effects take place.