BigBook.Com uses LIFO inventory accounting. Notes to BigBook.Com’s Year 9 financial state- ments disclose the following (it has a marginal tax rate of 35%): see pic attached to answer the following Determine the amount by which Year 9 retained earnings of BigBook.Com changes if FIFO is used. Determine the amount by which Year 9 net income of BigBook.Com changes if FIFO is used for both Years 8 and 9. 3 Discuss the usefulness of LIFO to FIFO restatements in an analysis ofBigBook.Com.
BigBook.Com uses LIFO inventory accounting. Notes to BigBook.Com’s Year 9 financial state- ments disclose the following (it has a marginal tax rate of 35%): see pic attached to answer the following Determine the amount by which Year 9 retained earnings of BigBook.Com changes if FIFO is used. Determine the amount by which Year 9 net income of BigBook.Com changes if FIFO is used for both Years 8 and 9. 3 Discuss the usefulness of LIFO to FIFO restatements in an analysis ofBigBook.Com.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
BigBook.Com uses LIFO inventory accounting. Notes to BigBook.Com’s Year 9 financial state- ments disclose the following (it has a marginal tax rate of 35%): see pic attached to answer the following
- Determine the amount by which Year 9
retained earnings of BigBook.Com changes if FIFO is used. - Determine the amount by which Year 9 net income of BigBook.Com changes if FIFO is used for both Years 8 and 9.
- 3 Discuss the usefulness of LIFO to FIFO restatements in an analysis ofBigBook.Com.
Transcribed Image Text:BigBook. Com uses LIFO inventory accounting. Notes to BigBook.Com's Year 9 financial state-
ments disclose the following (it has a marginal tax rate of 35%):
Inventories
Year 8
$392,675
401,342
Raw materials..
Finished products
Less LIFO reserve....
Year 9
$369,725
377,104
794,017
746,829
(46,000)
(50,000)
$748,017 $696,829
PROBLEM 4-2
Restating Inventory from
LIFO to FIFO
Expert Solution
Step 1
LIFO and FIFO are inventory valuation method. Where lifo stands for last in first out, means the inventory which came last in store will sold out first.
FIFO stands for first in first out, means the inventory came first in store will be sold first.
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