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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.

/in /by
PROBLEM 4–2
Restating Inventory from LIFO to FIFO
BigBook.Com uses LIFO inventory accounting. Notes to BigBook.Com’s Year 9 financial statements disclose the following (it has a marginal tax rate of 35%):
InventoriesYear 8Year 9
Raw Materials         392,675          369,725
Finished Producs         401,342          377,104
         794,017          746,829
Less LIFO Reserve         (46,000)         (50,000)
         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.
CHECK
(b) $2,600

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