1. How would the balance sheet accounts be affected if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?
2. What is the LIFO reserve and when is it used?
3. Why are inventories written down to the lower of cost or market?
4. What is the effect on the current period income statement and the balance sheet when inventories are written down using the lower of cost or market method? What is the effect on future period income statement and balance sheets?