a company uses LIFO and had a LIFO reserve of $90,000 in 06 and $85,000 in 05. The companys marginal tax rate is 28% and the COGs is $100,000 for 06. 2006 YE retained earnings if the firm had used FIFO would change by a $58,440 b 27,550 c 61,200 d 64,800 The change in 06 net income if FIFO inventory closing had been used is a -$3600 b -1200 c 1200 d 3600
- D => 90k * (1 - .28) = 64,800 2. COGS-FIFO = 100K - (90k - 85k) = 95K 5K difference in pretax income 5K * (1 - .28) = 3,600K additional income so the answer is D