BigBook

Finance Jan 25, 2021

BigBook.Com uses LIFO inventory accounting. Notes to Big Book.Com"s Year 9 financial statements disclose the following (it has a marginal tax rate of 35%):

	Year 8	Year 9
Inventories	$392,675	$369,725
Raw materials	401,342	$377,104.00
Finished products	794,017	746,829
Less LIFO reserve	(46,000)	(500000)
	$748,017	$696,829

Required:

a. Determine the amount by which Year 9 retained earnings of BigBook.Com changes if FIFO is used.

b. Determine the amount by which Year 9 net income of BigBook.Com changes if FIFO is used for both Years 8 and 9. c. Discuss the usefulness of LIFO to FIFO restatements in an analysis of BigBook.Com.