problem: Firm A and Firm B sell the same product. The cost of this product has been rising steadily throughout the year. Both companies reported the same net income for the year, although Firm A used the first-in, first-out method of pricing inventory, while Firm B used the last-in, first-out method.
[A] Determine which firm's valuation of ending inventory in the balance sheet is more likely to approximate replacement cost?
[B] Determine which firm reports a cost of goods sold figure in the current year income statement that is more likely to reflect the replacement cost of the units sold?