P7-8 (Algo) Evaluating the Choice between LIFO and FIFO Based on an Inventory Note LO7-6 [The...
P7-8 (Algo) Evaluating the Choice between LIFO and FIFO Based on an Inventory Note LO7-6
[The following information applies to the questions
displayed below.]
An annual report for National Paper Company included the following note:
The last-in, first-out inventory method is used to value most of
National Paper’s U.S. inventories . . . If the first-in, first-out
method had been used, it would have increased total inventory
balances by approximately $273.0 million and $230.0 million at
December 31, 2017, and 2016, respectively.
For the year 2017, National Paper Company reported net income
(after taxes) of $2,144.0 million. At December 31, 2017, the
balance of National Paper Company’s retained earnings account was
$6,880 million.
Determine the amount of retained earnings that National Paper would have reported at the end of 2017 if it always had used the FIFO method (assume a 35 percent tax rate). (Enter your answer in millions. Do not round your intermediate calculations. Round your final answer to the nearest whole number.)
Homework Answers
Income increase (decrease) for 2017 = Ending increased inventory - Beginning increased inventory
= $273 - $230 = $43 million Increase
Net Income increase for 2017 = $43 - Tax = $43 - 43*0.35 = $27.95
Retained earnings = $6880 + 27.95 = $6,907.95 million
Add Answer to:
P7-8 (Algo) Evaluating the Choice between LIFO and FIFO Based on
an Inventory Note LO7-6
[The...
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