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.