a. Determine the necessary adjustments to the following balance sheet line items for 2019. Note: Round your answers to the nearest whole dollar. Adjustment ($ in millions) 4,085 4,085 899 1,529 x Inventories $ Total assets $ Deferred tax liabilities $ Equity $ b. Determine the necessary adjustments to the following income statement line items for 2019. Note: Round your answers to the nearest whole dollar. Adjustment ($ in millions) (1,330) 1,330 293 1,037 Cost of goods sold $ Pretax income $ Income tax expense $ Net income $ c. Compute the common-size inventories percentage with LIFO and with FIFO for 2019. Hint: Compute inventory as percent of total assets. Note: Round the percentage to one decimal place (for example, enter 14.6% for 14.55555%). Common size inventories percentage with LIFO for 2019 Common size inventories percentage with FIFO for 2019 Do we believe the difference is material? Yes 6.4% 12.8%
a. Determine the necessary adjustments to the following balance sheet line items for 2019. Note: Round your answers to the nearest whole dollar. Adjustment ($ in millions) 4,085 4,085 899 1,529 x Inventories $ Total assets $ Deferred tax liabilities $ Equity $ b. Determine the necessary adjustments to the following income statement line items for 2019. Note: Round your answers to the nearest whole dollar. Adjustment ($ in millions) (1,330) 1,330 293 1,037 Cost of goods sold $ Pretax income $ Income tax expense $ Net income $ c. Compute the common-size inventories percentage with LIFO and with FIFO for 2019. Hint: Compute inventory as percent of total assets. Note: Round the percentage to one decimal place (for example, enter 14.6% for 14.55555%). Common size inventories percentage with LIFO for 2019 Common size inventories percentage with FIFO for 2019 Do we believe the difference is material? Yes 6.4% 12.8%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please show a complete step-by-step solution thank you!
note: the answer for EQUITY is NOT 1,529 or 1,037.

Transcribed Image Text:Adjusting Balance Sheet and Income Statement for LIFO to FIFO
In its December 2019 10-K, Phillips 66 reported the following information ($ millions).
2019 Assets 2019 Inventories 2019 LIFO Reserve 2018 LIFO Reserve Tax Rate
$55,784
$3,587
$4,085
$2,755
22%
a. Determine the necessary adjustments to the following balance sheet line items for 2019.
Note: Round your answers to the nearest whole dollar.
Adjustment ($ in millions)
4,085
4,085
899
1,529 x
Inventories
$
Total assets
$
Deferred tax liabilities $
Equity
$
b. Determine the necessary adjustments to the following income statement line items for 2019.
Note: Round your answers to the nearest whole dollar.
Cost of goods sold
Pretax income
Adjustment ($ in millions)
(1,330)
1,330
293
1,037
$
$
Income tax expense $
Net income
$
c. Compute the common-size inventories percentage with LIFO and with FIFO for 2019.
Hint: Compute inventory as percent of total assets.
Note: Round the percentage to one decimal place (for example, enter 14.6% for 14.55555%).
Common size inventories percentage with LIFO for 2019
Common size inventories percentage with FIFO for 2019
Do we believe the difference is material? Yes
6.4% ✔
12.8%
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