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Cruise Brown, representative of Nokia in America, recently read an article that reported that at least 100 of the largest 500 companies in the United States were either adopting or considering to adopt the last-in first-out (LIFO) method for valuing inventories. The article stated that the firms were switching to LIFO to (1) neutralize the effect of inflation in their financial statements, (2) eliminate inventory profits, and (3) reduce income taxes. Mr. Brown wonders if the switch would benefit the company. Nokia manufactures and sells network equipment and currently uses the first-in first-out (FIFO) method of inventory valuation in its periodic inventory system. The company has a high inventory turnover rate, and inventories represents a significant portion of the assets. Mr. Rajeev Surf, president of Nokia world-wide in Finland, told Mr. Brown that the LIFO system is more costly to operate and will provide little benefit to companies. Mr. Brown intends to use the inventory method that is best for the company in the long run rather than selecting a method just because it is the current fad. 1. Which method would you recommend to Mr. Cruise Brown? Why? 2. Do you agree to the arguments of eliminating inventory profits and "reducing income tax" for this company? 3. Do you agree to the argument that LIFO system is costly to operate with little benefit in this company

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