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.

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%):


Inventories	Year 8	Year 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