period.

True-False

22 An overstatement of ending inventory leads to an overstatement of cost of

goods sold.

1 Periodic inventory systems provide a greater degree of management control

over inventory.

23 In the lower of cost or market determination, the ceiling is the inventorys

net realizable value.

2 In the perpetual inventory system inventory losses must be recoded in the

accounts.

24 The use of the lower of cost or market method to value inventory for reporting purposes employs the accounting principle of matching.

3 In a periodic inventory system the ending inventory must be determined by

physical count.

25 A price index is a ratio that compares prices during the current year with
prices during a base period.

4 A periodic system of inventory is used when inventory volumes are low and
per unit costs are high.

26 The time at which initial adoption of dollar-value LIFO takes place is called
the past period.

5 Inventory shipped on consignment is owned by the consignee.

6 Inventory carrying cost includes storage costs.
7 Under absorption costing all costs are inventoried.

Multiple-Choice Questions

8 Variable costing is an acceptable costing method for GAAP.

Select the best answer from those provided.

9 Analysts must be aware that with the use of absorption costing, as inventory
absorbs more fixed costs, reported income tends to decrease.

27 In a periodic inventory system the ending inventory and cost of goods sold
must be determined by
a.
external auditors.
b.
physical count.
c.
a certification of inventory.
d.
reference to a running inventory balance.

10 Beginning inventory plus inventory purchases equals cost of goods sold.

11 GAAP does not require the cost flow assumption to conform to the actual
physical flow of the goods.
12 FIFO matches current costs with current revenues.
13 The input cost changes that occur after the purchase of inventory items in a
current cost accounting system are recognized as unrealized holding gain.

28 A periodic system of inventory

a.
reduces record keeping.
b.
increases record keeping.
c.
increases the cost of maintaining inventory.
d.
eliminates the need for a physical count.

14 Under GAAP, current cost accounting may or may not be used at the discretion of management.
15 The primary difference b

etween FIFO and LIFO is that each method makes

a different choice regarding which element is shown at the out of date cost.
16 The formula to convert the cost of goods sold LIFO to an estimate of the
cost of goods sold FIFO is cost of goods sold LIFO increase in LIFO reserve =
cost of goods sold FIFO.

29 The use of perpetual inventory systems is preferred where a

a.
large number of expensive inventory units exist.
b.
small number of expensive inventory units exist.
c.
large number of inexpensive inventory units exist.
d.
small number of inexpensive inventory units exist.

17 Firms that use LIFO must disclose the dollar magnitude of the difference
between LIFO and FIFO cost.
18 As a firm liquidates old LIFO layers of inventory, the lower costs of the LIFO
layers are matched against current sales dollars resulting in a profit margin that
is lower than normal.

30 Goods held on consignment are included in the inventory of

a.
the consignor.
b.
the consignee.
c.
both the consignor and the consignee.
d.
neither the consignor nor the consignee.

19 Current ratio distortion under LIFO inventory costing may be adjusted by

subtracting the LIFO reserve from current assets.
20 U. S. tax rules specify that if LIFO is used for tax purposes, the external financial statements must also use LIFO.
21 During periods of rising inventory costs, LIFO cost of goods sold is understated because of the inventory holding gains that have occurred during the

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31 Manufacturing costs not considered to be closely associated with production

are called

09-Inventories.doc

a.
b.
c.
d.

period cost.
product costs.
absorption costs.
variable costs.

38 The
current
a.
b.
c.
d.

32 Variable costing is also referred to as

a.
direct costing.
b.
full costing.
c.
variable costing.
d.
fixed costing.

Table 9-1
The following information pertains to the Fan Companys inventory item B1008:
March

33 Using absorption costing

a.
only fixed costs are inventoried.
b.
only variable costs are inventoried.
c.
all production costs are inventoried.
d.
fixed costs are expensed as incurred.

1
5
14
31

Inventory Balance
Purchase
Purchase
Inventory

400
1,400
280
520

units
units
units
units

@ $3.10
@ $3.20
@ $3.25

39 Refer to Table 9-1. In a periodic inventory system, the ending LIFO inventory is
a.
$1,624.
b.
$1,655.
c.
$1,678.
d.
d 733.

34 Analysts must be aware that with the use of absorption costing, as inventory
absorbs more fixed costs, reported income tends to
a.
increase.
b.
decrease.
c.
remain the same.
d.
become highly volatile.

40 Refer to Table 9-1. In a periodic inventory system, the LIFO cost of goods
sold is
a.
$4,952.
b.
$4,967.
c.
$4,993.
d.
$5,006.

35 Analysts must recognize that the use of the specific identification method to
value inventory has a serious deficiency because it
a.
allows manipulation of income.
b.
allows manipulation of period costs.
c.
allows manipulation of selling expenses.
d.
allows manipulation of administrative expenses.

41 Refer to Table 9-1. In a periodic inventory system, the FIFO cost of goods
sold is
a.
$4,952.
b.
$4,967.
c.
$4,993.
d.
$5,006.

36 Goods available for sale needs to be allocated between

a.
beginning inventory and inventory purchases.
b.
beginning inventory and ending inventory.
c.
ending inventory and cost of goods sold.
d.
inventory purchases and cost of goods sold.

42 Refer to Table 9-1. In a periodic inventory system, the ending FIFO inventory is
a.
$1,624.
b.
$1,655.
c.
$1,678.
d.
$1,733.

37 Financial analysts recognize that the deficiency of the FIFO cost flow assumption is the failure to
a.
match current costs with current revenues.
b.
match current costs with oldest revenues.
c.
match oldest costs with current revenues.
d.
match oldest costs with oldest revenues.

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input cost changes that occur after the purchase of inventory items in a
cost accounting system are recognized as
realized gains and losses.
unrealized holding gains and losses.
extraordinary gains and losses.
costs of goods sold.

43 The Wheat Company has used the LIFO method for inventory valuation since

09-Inventories.doc

the start of business 15 years ago. The current year ending inventory is $375,000.
If the FIFO method of inventory had been used, the inventory would be $450,000.
If Wheat Company had used the FIFO inventory method, income before income
taxes would have been
a.
$75,000 higher over the 15 year period.
b.
$75,000 lower over the 15 year period.
c.
$75,000 higher in the current year.
d.
$75,000 lower in the current year.
44 The
a.
b.
c.
d.

$197,500 under LIFO. The cost of goods sold under FIFO should be
a.
$192,500.
b.
$197,500.
c.
$202,500.
d.
$222,500.
49 The Mick Company reported a LIFO cost of goods sold for the year of
$100,000. The LIFO reserve decreased by $30,000 for the year. An estimate of
the cost of goods sold under FIFO is
a.
$ 70,000.
b.
$ 130,000.
c.
$ 160,000.
d.
$ 200,000.

LIFO reserve disclosure is required because LIFO inventory costs are

higher than FIFO inventory costs.
lower than FIFO inventory costs.
equal to FIFO inventory costs.
usually of no consequence.

50 As a firm liquidates old LIFO layers of inventory, the lower costs of the LIFO layers are matched against current sales dollars resulting in a profit margin that is
a.
inflated.
b.
deflated.
c.
lower than normal.
d.
always the same as under FIFO.

45 The conversion of a LIFO inventory to approximate the inventory at FIFO is

accomplished through application of which one of the following formulas?
a.
FIFO inventory = LIFO inventory x LIFO reserve
b.
FIFO inventory = LIFO inventory / LIFO reserve
c.
FIFO inventory = LIFO inventory LIFO reserve
d.
FIFO inventory = LIFO inventory + LIFO reserve

51 Current ratio distortion under LIFO inventory costing may be adjusted by

a.
adding the LIFO reserve to current assets.
b.
subtracting the LIFO reserve from current assets.
c.
adding the LIFO reserve to current liabilities.
d.
subtracting the LIFO reserve from current liabilities.

46 The formula to convert the cost of goods sold LIFO to an estimate of the
cost of goods sold FIFO is
a.
cost of goods sold LIFO + increase in LIFO reserve = cost of goods
sold FIFO.
b.
cost of goods sold LIFO increase in LIFO reserve = cost of goods
sold FIFO.
c.
cost of goods sold LIFO decrease in LIFO reserve = cost of goods
sold FIFO.
d.
cost of goods sold LIFO + beginning LIFO reserve = cost of goods sold
FIFO.

52 Inventory turnover distortion under LIFO inventory costing may be adjusted by

a.
adding the LIFO reserve amounts to cost of goods sold and adjusting
beginning and ending inventory for LIFO liquidation profits whenever
LIFO dipping occurs.
b.
subtracting the LIFO reserve amounts from cost of goods sold and
adjusting beginning and ending inventory for LIFO liquidation profits
whenever LIFO dipping occurs.
c.
adding the LIFO reserve amounts to beginning and ending inventory
and adjusting cost of goods sold for LIFO liquidation profits whenever
LIFO dipping occurs.
d.
subtracting the LIFO reserve amounts from beginning and ending inventory and adjusting cost of goods sold for LIFO liquidation profits
whenever LIFO dipping occurs.

47 The Xano Company reported merchandise inventory at LIFO of $450,000 on

the year-end financial statements. The company also reported a LIFO reserve of
$34,000. An estimate of the inventory balance if the inventory had been reported using the FIFO assumption is
a.
$382,000.
b.
$416,000.
c.
$461,000.
d.
$484,000.

53 The LIFO conformity rule states that

a.
if LIFO is used for tax purposes, the external financial statements must
also use LIFO.

48 The Skone Corporation reported at the end of the year a LIFO reserve of
$25,000. The beginning LIFO reserve was $20,000. The cost of goods sold was

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09-Inventories.doc

b.
c.
d.

if FIFO is used for tax purposes, the external financial statements must
also use FIFO.
if LIFO is used for tax purposes, the external financial statements must
also use FIFO.
if FIFO is used for tax purposes, the external financial statements must
also use LIFO.

58 The use of the lower of cost or market method to value inventory for reporting purposes is a departure from the accounting principle of
a.
going concern.
b.
conservatism.
c.
matching.
d.
historical cost.

54 Firms that use FIFO inventory cost assumptions always include some realized
holding gains in reported income in periods of
a.
level prices.
b.
deflation.
c.
falling prices.
d.
rising prices.

59 TAD, Inc. uses the lower of cost or market method to value inventory. If the
inventory value is replacement cost, which one of the following statements is true?
a.
Historical cost is less than replacement cost.
b.
Replacement cost is greater than net realizable value less a normal
profit margin.
c.
Replacement cost is greater than historical cost.
d.
Net realizable value is greater than historical cost.

55 The size of the divergence between FIFO cost of goods sold and replacement
cost of goods sold depends on the rapidity of the inventory turnover and the
a.
change in accounts receivable turnover.
b.
divergence of total asset turnover from previous periods.
c.
severity of input cost change.
d.
rapidity of fixed asset turnover.

60 When applying the lower of cost or market method, market value cannot
exceed the
a.
floor.
b.
net realizable value.
c.
net realizable value less a normal profit margin.
d.
replacement cost.

Table 56-67
The World Companys financial statements for 2006 and 2007 contain the following errors:
Ending Inventory
Insurance Expense

2007
$6,000 overstated
$4,000 understated

61 The use of the lower of cost or market method to value inventory indicates a
probable loss sustained. This is an application of the accounting principle of
a.
matching.
b.
going concern.
c.
conservatism.
d.
consistency.

2006
$16,000 overstated
$12,000 overstated

56 Refer to Table 56-67. If the proper correcting entries were made at the end
of 2006, how much will 2007 income before taxes be overstated or understated?
a.
$ 2,000
understated
b.
$ 2,000
overstated
c.
$ 10,000
understated
d.
$ 10,000
overstated

62 The use of the lower of cost or market method to value inventory for reporting purposes employs the accounting principle of
a.
cost-benefit.
b.
matching.
c.
historical cost.
d.
conservatism.

57 Refer to Table 56-67. If no correcting entries were made at the end of 2006,
by how much will retained earnings be overstated or understated at the end of
2007? Ignore tax consequences.
a.
$ 2,000
understated
b.
$ 2,000
overstated
c.
$ 10,000
understated
d.
$ 10,000
overstated

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Table 9-3
Konan, Inc. uses the lower of cost or market method to determine inventory
value. The following information pertains to the ending inventory:
Item
L
4

Cost
$40

Replacement
Cost
$38

Selling
Price
$50

Cost of
Completion
$2

Normal
Profit
$10

09-Inventories.doc

M
N

52
20

40
24

60
30

2
2

14
6

Table 9-4
The Shill Company uses the dollar-value LIFO method for valuing inventory. The
following inventory information is available at the year end:

63 Refer to Table 9-3. The maximum limit for market value of product L is
a.
$36.
b.
$38.
c.
$48.
d.
$50.

Year
1
2
3
4

64 Refer to Table 9-3. The minimum limit for market value of product M is
a.
$42.
b.
$46.
c.
$56.
d.
$60.

Price Index
100
105
108
110

69 Refer to Table 9-4. The inventory at the end of Year 2 under dollar-value
LIFO is
a.
$238,095.
b.
$240,000.
c.
$250,000.
d.
$262,500.

65 Refer to Table 9-3. The lower of cost or market for product N is

a.
$20.
b.
$22.
c.
$24.
d.
$28.

70 Refer to Table 9-4. The inventory under dollar-value LIFO at the end of Year 3
is
a.
$274,075.
b.
$276,800.
c.
$278,856.
d.
$300,000.

66 Refer to Table 9-3. The lower of cost or market for item M is

a.
$40.
b.
$42.
c.
$46.
d.
$52.

71 Refer to Table 9-4. The inventory under dollar-value LIFO at the end of Year 4
is
a.
$240,000.
b.
$263,657.
c.
$274,074.
d.
$286,000.

67 Refer to Table 9-3. The market value for item N is

a.
$20.
b.
$24.
c.
$28.
d.
$30.

72 LIFO layers are more likely to be liquidated when inventory records are kept on
a.
an inventory group basis.
b.
a total inventory basis.
c.
an item-by-item basis.
d.
a specific identification basis.

68 ABC Company has elected to adopt the dollar-value LIFO inventory method
when the inventory is valued at $125,000. The adoption takes place as of January 1, 2005 when the entire inventory represents a single pool. ABC Company
determined that the inventory at December 31, 2005 was $144,375 at current
year cost and $131,250 at base year cost using a relevant price index of 1.10.
The inventory at December 31, 2005 under dollar value LIFO is
a.
$131,250.
b.
$131,875.
c.
$138,125.
d.
$144,375.

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Year End Price

$200,000
250,000
296,000
286,000

73 Refer to the excerpts of the 1996 Olin Corporation Annual Report on the following pages. All questions relate to 1996 unless stated otherwise. Assume a 35%
corporate tax rate where necessary.
Required:
1 What amount of inventory is on the balance sheet?

09-Inventories.doc

2 Compute Olins cost of goods sold using FIFO instead of LIFO.

3 Compute the amount of the cumulative tax deferral resulting from LIFO existing at the end of 1996.
4 Compute how being on LIFO affects Olins book value (common stockholders
equity) at the end of 1996.
5 Compute the inventory turnover ratio to approximate physical unit flow for
1996.

OPERATING INCOME
Interest Expense
Interest and Other Income
INCOME FROM CONTINUING
OPERATIONS BEFORE TAXES
Income Taxes

$ 2.56
.11

$ 1.53
.24

Net Income

$ 5.27

$ 2.67

$ 1.77

Raw materials and supplies

Work in process
Finished goods

Consolidated Statements Of Income

SALES
OPERATING EXPENSES:
Cost of Goods Sold
Selling and Administration
Research and Development

$ 5.43
(0.16)

Notes To Financial Statements Inventories

Olin Corporation
Years ended December 31
($ in millions, except per share data)

Fully Diluted:
Continuing Operations
Discontinued Operations

1996

1995

1994

$ 2,638

$ 2,665

$ 2,268

2,021
319
39

2,115
293
34

1,844
256
30

259
29
216

223
35
16

138
28
9

LIFO reserve
Inventory, net

1996
$ 153
144
172
469

1995
$ 167
168
209
544

(154)

(184)

$ 315

$ 360

Inventories valued using the LIFO method comprised 71% and 76% of the total
inventories at December 31, 1996 and 1995, respectively. If the first-in, first-out
(FIFO) method of inventory accounting had been used, inventories would have
been approximately $154 and $184 higher than reported at December 31, 1996
and 1995, respectively.
74 Refer to the excerpts from the February 26, 1999 Annual Report of Steelcase
on the following pages. All questions relate to the year ended February 26, 1999
unless stated otherwise. Assume a 35% corporate tax rate where necessary.

446
158

204
70

119
40

Income from Continuing Operations

Income (Loss) from Discontinued Operations,
Net of Taxes

288

134

79

1 What amount of inventory is on the balance sheet at February 26, 1999?

12

2 Assume that ending inventory was overstated at February 26, 1999. Explain
how net income would be affected by the error.

NET INCOME

280

140

91

$ 276

$ 134

$ 84

Preferred Dividends
Net Income Available To
Common Shareholders
Net income (loss) per common share:
Primary:
Continuing Operations
Discontinued Operations
Net Income

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(8)

Required:

3 The inventory note states that inventory amounts are based upon last-in,
first-out (LIFO) cost, not in excess of market. Which accounting principle or
concept justifies writing down assets when market prices are lower than cost
but leaving them at cost when market prices are higher than cost.
4 How much has Steelcase deferred in income taxes since being on LIFO?

$ 5.52
(0.18)
$ 5.34

2.63
.12

$ 1.57
.26

$ 2.75

$ 1.83

5 Explain why investors would want to know that LIFO liquidations increased
net income by $4.1 million for the year ended February 26, 1999.
6 Compute the inventory turnover ratio to approximate physical unit flow for the
year ended February 26, 1999.

09-Inventories.doc

Steelcase inc.

$ 96.5

$ 105.8

Consolidated Statements Of Income

The effect of LIFO liquidations on net income was $4.1 million, $0.6 million and
$5.4 million for 1999, 1998 and 1997, respectively.

(in millions, except per share data)

Year Ended

February 26

1999
Net sales
Cost of sales
Gross profit
Selling, general and administrative
expenses
Patent litigation expense
Operating income
Patent litigation interest expense
Other income, net
Income before provision for income taxes
and equity in net income of joint
ventures and dealer transitions
Provision for income taxes

1998

1997

$ 2,742.5

$ 2,760.0

$ 2,408.4
1,753.1

1,756.6

1,551.6

989.4

1,003.4

856.8

672.2
-317.2
--

686.0
-317.4
--

20.2

22.6

Answers
1. E; False
2. E; True
3. E; True
4. E; False
5 M; False

630.4
84.8
141.6
(111.7)

6 M; True
7 M; True
8 M; False

21.4

9 M; False
10 E; False
11 M; True

337.4
124.9

Income before equity in net income of

joint ventures and dealer transitions
212.5
Equity in net income of joint ventures
and dealer transitions
8.9
Net income
$ 221.4
Earnings per share (basic and diluted)

February 27 February 28,

$ 1.44

340.0
130.9

51.3
23.6

209.1

27.7

15 M; True

7.9
$ 217.0

-$ 27.7

16 M; True

$ 1.40

$ 0.18

12 M; False
13 M; True
14 M; False

17 M; True
18 M; False
19 M; False
20 M; True

Notes To Consolidated Financial Statements--(Continued)

Inventories
Substantially all inventories are valued based upon last-in, first-out (LIFO)
cost, not in excess of market.

21 M; False
22 M; False
23 M; True

Inventories consist of (in millions):

24 M; False

February 26, February 27,

Finished goods
Work in process
Raw materials
LIFO reserve

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1999
$ 40.9
32.3
70.8
144.0
(47.5)

1998
$ 42.9
30.8
83.7
157.4
(51.6)

25 M; True
26 M; False
27. E; (b)
28. E; (a)
29. M; (b)

09-Inventories.doc

30 M; (a)

65 M; (a)

31 M; (a)

66 M; (b)

32 M; (a)

67 M; (b)

33 M; (c)

68 M; (b)

34 M; (a)

69 M; (b)

35 M; (a)

70 M; (c)

36 E; (c)

71 M; (b)

37 M; (a)

72 M; (c)

38 M; (b)
39 M; (a)

Explanation to Selected Multiple-Choice Questions

39 Ending LIFO inventory:
400 @ $3.10 =
$ 1,240
120 @ 3.20 =
384
$ 1,624

40 M; (d)
41 M; (a)
42 M; (c)
43 M; (a)
44 M; (b)
45 M; (d)
46 M; (b)
47 M; (d)

40 LIFO cost of goods sold:

1,280 @ 3.20 =
$ 5,006

280 @ $3.25 =
4,096

$ 910

41 FIFO cost of goods sold:

1,160 @ 3.20 =

400 @ $3.10 =

$ 1,240
3,712
$ 4,952

42 Ending FIFO inventory:

240 @ 3.20 =

280 @ $3.25 =

$ 910
768
$ 1,678

48 M; (a)
49 M; (b)
50 M; (a)
51 M; (a)
52 M; (c)
53 M; (a)

43 FIFO inventory
LIFO inventory

$ 875,000
750,000
$ 75,000 higher with FIFO

47 LIFO inventory
+ LIFO reserve
FIFO inventory

$ 450,000
34,000
$ 484,000

48 LIFO cost of goods sold

increase in LIFO reserve
estimated FIFO COGS

$ 197,500
(5,000)
$ 192,500

49 LIFO cost of goods sold

+ decrease in LIFO reserve
estimated FIFO COGS

$ 100,000
30,000
$ 130,000

54 M; (d)
55 M; (c)
56 M; (d)
57 M; (a)
58 M; (d)
59 M; (b)
60 M; (b)
61 M; (c)
62 M; (d)
63 M; (c)

56 2007: Cost of goods sold understated

64 M; (a)

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$ 6,000

RE over

$ 6,000

09-Inventories.doc

Insurance understated
Retained earnings overstated
57 2006: Cost of goods sold understated
Insurance overstated
Retained earnings overstated

(4,000)
$ 10,000
$ 16,000
12,000
$ 4,000

2007: Cost of goods sold overstated$ 16,000

Cost of goods sold understated
6,000
Insurance understated
(4,000)
Retained earnings overstated
Total retained earnings understated

RE over

4,000

73. Solution:
1 $315 million

RE over
RE under

2 Reported cost of goods sold + decrease in LIFO reserve = 2,021 + 30 =

2,051

$ 16,000
(12,000)

3 LIFO reserve (tax rate = 154 .35 = 53.9

4 LIFO reserve ((1 tax rate) = 154 .65 = 100.1 decrease

RE under $ (16,000)
RE over
6,000
RE over
4,000
$ (6,000)
$ 2,000

5 Reported cost of goods sold/Average FIFO inventory = 2,021/[(469 +544)/2]

= 3.99
74 Solution:
1 $96.5 million

63 Net real value (ceiling) = selling price $50 cost of completion $1 = $48
64 Floor = selling price $60 cost of completion $4 normal profit $14 = $42
65 Cost = $20 market = $24 (replacement $24, ceiling $28, floor $22)
LCM = $20
66 Cost = $52 market = $42 (replacement $40, ceiling $56, floor $42)
LCM = $42
67 Market = $24 (replacement $24, ceiling $28, floor $22)
68
Base year inventory
$125,000 x 1.00 =
Increase for 2005 (base year prices)
6,250 x 1.10=
Ending dollar value LIFO inventory
69 End inventory $250,000/price index 1.05 =
inventory at base year price
=
Base year inventory
$200,000 x 1.00
Increase for Year 2 (base year prices)
38,095 x1.05
Ending dollar value LIFO inventory
70 End inventory $296,000/price index 1.08 =
inventory at base year price
=
Base year inventory
$200,000 x 1.00
Year 2 layer (base year prices)
38,095 x1.05
Increase for Year 3 (base year prices)
35,979 x1.08
Ending dollar value LIFO inventory
71 End inventory $286,000/price index 1.10 =
inventory at base year price
=
Base year inventory
$200,000 (1.00
Year 2 layer (base year prices) 38,095 (1.05
Year 3 layer (base year prices) 21,905 (1.08
Ending dollar value LIFO inventory

050609

2 Net income would be overstated by the amount of the error net of tax. The
fundamental accounting equation can be used to show the effect.
Asset (incr) = Liabilities + Stockholders Equity (incr)
3 Conservatism
4 LIFO reserve (tax rate = 47.5 .35 = 16.63
5 The 4.1 should be viewed as transitory income. Consequently, cost of goods
sold will be higher in future periods holding sales constant. Also, the resulting
gross margin for 1999 is not comparable to 1998 or future periods. Investors
should incorporate this information into their projections when valuing Steelcase.

$ 125,000
6,875
$ 131,875

=
=

$ 238,095
$ 200,000
40,000
$ 240,000

=
=
=

$ 274,074
$ 200,000
40,000
38,857
$ 278,857

=
=
=

$ 260,000
$ 200,000
40,000
23,657
$ 263,657

6 (Reported cost of goods sold + pretax LIFO liquidation)/average FIFO inventory = (1,753 + 4.1/.65)/[(144 + 157.4)/2] = 11.67

09-Inventories.doc