DRP Company began business on the first day of 2014. The following are DRP's purchases of inventory:

On December 20, 130 units were sold, for $20 each, leaving inventory of 120 units. The tax rate for 2014 was 25%. DRP has no other expenses.

Question:

a. Suppose DRP uses LIFO for inventory valuation. What is the balance of the inventory account on December 31, 2014? What is the net income for 2014?

b. Suppose DRP uses FIFO for inventory valuation. What is the balance of the inventory account on December 31, 2014? What is the net income for 2014?

c. Suppose DRP uses LIFO for inventory valuation. What is the balance of the LIFO reserve account presented in the footnotes of DRP financial statements as of December 31, 2014? Reconcile it with the differences in net income under parts a and b above.

d. How would your answer to parts a and b above change if the replacement cost (market value) of the inventory as of December 31, 2014 is $12?

Date March 17 April 19 May 14 Quantity 100 units 50 units 100 units Cost per unit $10 $12 $13