GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
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Textbook Question
Chapter 7, Problem 7.8P
Evaluating the Choice between LIFO and FIFO Based on an Inventory Note
An annual report for International Paper Company included the following note:
The last-in, first-out inventory method is used to value most of International Paper's U.S. inventories … If the first-in. first-out method had been used, it would have increased total inventory balances approximately $350 million and $334 million at December 31, 2011, and 2010, respectively.
For the year 2011, International Paper Company reported net income (after taxes) of $1,341 million. At December 31, 2011, the balance of International Paper Company’s
Required:
- 1. Determine the amount of net income that International Paper would have reported in 2011 if it had used the FIFO method (assume a 30 percent tax rate).
- 2. Determine the amount of retained earnings that International Paper would have reported at the end of 2011 if it always had used the FIFO method (assume a 30 percent tax rate).
- 3. Use of the LIFO method reduced the amount of taxes that International Paper had to pay in 2011 compared with the amount that would have been paid if International Paper had used FIFO. Calculate the amount of this reduction (assume a 30 percent tax rate).
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An annual report for International Paper Company included the following note:
The last-in, first-out inventory method is used to value most of International Paper’s U.S. inventories . . . If the first-in, first-out method had been used, it would have increased total inventory balances by approximately $293 million and $290 million at December 31, 2017, and 2016, respectively.
For the year 2017, International Paper Company reported net income (after taxes) of $2,144 million. At December 31, 2017, the balance of International Paper Company’s retained earnings account was $6,180 million.
Required:
1.
Determine the amount of net income that International Paper would have reported in 2017 if it had used the FIFO method (assume
a 30 percent tax rate). (Enter your answer in millions. Round your intermediate and final answer to 1 decimal place.)
Net income
million
The management of Swifty Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-
cost. The company requests your help in determining the results of operations for 2022 if either the FIFO or the LIFO method had
been used. For 2022, the accounting records show these data:
Inventories
Beginning (8,000 units)
Ending (13,000 units)
Purchases were made quarterly as follows.
Quarter Units
1
50,000
2
(a)
3
4
40.000
40.000
$32,000
60,000
190,000
Unit Cost
$4.20
4.35
4.50
4.70
Your Answer Correct Answer
Total net sales (185,000 units)
Total cost of goods purchased (190,000 units)
Total Cost
$210,000
174,000
180,000
282,000
$846,000
Operating expenses were $130,000, and the company's income tax rate is 40%.
Purchases and Sales
Prepare comparative condensed income statements for 2022 under FIFO and LIFO.
SWIFTY INC.
Condensed Income Statements
December 31, 2022
For the Year Ended December 31, 2022
For the Month Ended December 31, 2022
$1,137,750…
Chapter 7 Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
Ch. 7 - Why is inventory an important item to both...Ch. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - The chapter discussed tour inventory costing...Ch. 7 - Prob. 7QCh. 7 - Contrast the effects of LIFO versus FIFO on...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Prob. 10Q
Ch. 7 - Explain briefly the application of the LCM concept...Ch. 7 - Prob. 12QCh. 7 - Consider the following information: ending...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a component of the...Ch. 7 - Consider the following information: beginning...Ch. 7 - Consider the following information: beginning...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - If the ending balance in accounts payable...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Prob. 7.1MECh. 7 - Recording the Cost of Purchases for a Merchandiser...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - Inferring Purchases Using the Cost of Goods Sold...Ch. 7 - Prob. 7.5MECh. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Reporting Inventory under Lower of Cost or Market...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Prob. 7.9MECh. 7 - Prob. 7.1ECh. 7 - Inferring Missing Amounts Based on Income...Ch. 7 - Prob. 7.3ECh. 7 - Inferring Merchandise Purchases Abercrombie and...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Prob. 7.11ECh. 7 - Reporting Inventory at Lower of Cost or Market...Ch. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - (Chapter Supplement A) Analyzing the Effects of a...Ch. 7 - (Chapter Supplement B) FIFO and LIFO Cost of Goods...Ch. 7 - (Chapter Supplement C) Recording Sales and...Ch. 7 - Analyzing Items to Be Included in Inventory Travis...Ch. 7 - Prob. 7.2PCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Prob. 7.4PCh. 7 - Evaluating the LIFO and FIFO Choice When Costs Are...Ch. 7 - Evaluating the Income Statement and Cash Flow...Ch. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - Evaluating the Choice between LIFO and FIFO Based...Ch. 7 - Prob. 7.9PCh. 7 - (Chapter Supplement A) Analyzing LIFO and FIFO...Ch. 7 - Prob. 7.1APCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Evaluating the UFO and FIFO Choice When Costs Are...Ch. 7 - Prob. 7.4APCh. 7 - Prob. 7.1CONCh. 7 - Finding Financial Information Refer to the...Ch. 7 - Finding Financial Information Refer to the...Ch. 7 - Comparing Companies within an Industry Refer to...Ch. 7 - Prob. 7.4CPCh. 7 - Using Financial Reports: Interpreting Effects of...Ch. 7 - Making a Decision as a Financial Analyst: Analysis...Ch. 7 - Evaluating an Ethical Dilemma: Earnings, Inventory...
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