Whirlpool Corporation, the world's leading manufacturer of major home appliances, reported these figures for 19X1 (in millions of dollars):

Income statement (adapted):

Note 4 of the financial statements disclosed:
Liquidation of prior years' LIFO inventory layers increased net earnings \(\$ 8\) million.
\section*{Required}
1. Explain what the LIFO liquidation means and why it affects net earnings.
2. Would Whirlpool management be pleased or displeased at the increase in income due to the LIFO liquidation? Give your reason.
3. Prepare a revised income statement for Whirlpool Corporation if no LIFO liquidation had occurred. The income tax rate was 43.33 percent.

Transcribed Image Text:

Net revenues... $6,757 Cost of products sold. 4,967 Operating expenses... 1,397 Other expense (net). 93 Earnings before income taxes. 300 Income taxes 130 Net earnings. $ 170