The inventory cost flow assumption that is used cannot have a material impact on the financial statements.

Question

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The inventory cost flow assumption that is used can have a material impact on the financial statements, particularly on the balance sheet and income statement. The choice of cost flow assumption can affect the valuation of inventory, cost of goods sold, and gross profit, as well as the accuracy of financial ratios and analysis. Therefore, it is important for companies to choose a cost flow assumption that reflects the actual flow of goods and best aligns with their business operations.

The Inventory Cost Flow Assumption That Is Used Cannot Have