Chapter 8 - Valuation of Inventories: A Cost-Basis Approach - Review and Practice - Questions - Page 422: 19

1.“Phantom (paper) profits”: Overstated profits that arise when the cost of replacing inventory exceeds the inventory costs such that the cost of the goods sold is understated. 2.“High LIFO profits”: Overstated profit arising from the utilization of the LIFO methodology; the LIFO method results in the reduction of the inventory profits. Such overstatements are not reported in other methodologies, such as FIFO.

1.“Phantom (paper) profits”: Overstated profits that arise when the cost of replacing inventory exceeds the inventory costs such that the cost of the goods sold is understated. 2.“High LIFO profits”: Overstated profit arising from the utilization of the LIFO methodology; the LIFO method results in the reduction of the inventory profits. Such overstatements are not reported in other methodologies, such as FIFO.