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Homework answers / question archive / BigBook

BigBook

Finance

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.

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