Of special note, phantom inventory profits occur when the inventory costs matched against sales are...
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Accounting
Of special note, phantom inventory profits occur when the inventory costs matched against sales are less than the replacement cost of the inventory. The cost of goods sold therefore is understated and profit is considered overstated. Phantom profits are said to occur when FIFO is used during periods of rising prices. If you had a choice of FIFO or another inventory valuation method, which one would you choose and why? Anyone?
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