Inventories

Effective December $30,2007($beginning of $4$th quarter of Fiscal Year $2008),$ the Company changed its inventory valuation method from the lower of cost$,$

determined under the FIFO method, or market to the lower of cost$,$ determined under the LIFO method, or market. In the high inflation environment that

the Company was experiencing, the Company believed that the LIFO inventory method was preferable over the FIFO method because it better compares

the cost of current production to current revenue. The effect of LIFO was to increase continuing net earnings by $$7\mathrm{.}7$ million in $2020$ and to reduce net

earnings by $$18\mathrm{.}2$ million in $2019,$ compared to what would have been reported using the FIFO inventory method. The increase in earnings per share was

$$1\mathrm{.}38($ $$1\mathrm{.}37$ diluted$)$ in $2020$; and a reduction in earnings per share of $$3\mathrm{.}14($ $$3\mathrm{.}14$ diluted$)$ in $2019.$ There were LIFO liquidations of $$4\mathrm{.}0$ million in $2020$ and

$$17\mathrm{.}2$ million in $2019.$ Most of this LIFO liquidation in $2019$ is reported as Discontinued Operations since it related to the Modesto fruit. The inventories by

category and the impact of using the LIFO method are shown in the following table:

In prior financial statements, Cicero has stated that it "manages the Company for cash, not reported earnings" and that the "decision to switch to LIFO has

turned out to be a very prudent one of the last five years."

a$.$ Compute the ratio of inventories to total current assets for $2020$ and $2019.$ b$.$ Compute inventory turnover for both $2020$ and $2019(2018$ ending inventories were $$408,497).$ Interpret and explain the change in inventory turnover as

positive or negative for the Company.

The inventory turnover rate has

$$ from $2019$ to $2020,$ due more to a

rather than an

c$.$ What inventory costing method does the Company use? What effect has the use of this method $($relative to FIFO or LIFO$)$ had on its reported income for

$2020$ and $2019?$ Was the result an increase or decrease? Explain.

Cicero uses $$ inventory costing method.

The effect was to

$$ net earnings by $$

$$ million in $2020$ and to

$$ earnings by $

$$ million in

$2019$ relative to if the firm had used

d$.$ Cicero claims that it manages its company for cash flow. Does its inventory reporting help the Company to do so$?$ How much in taxes has the Company

saved, assuming a $25\%$ tax rate, by the inventory approach it adopted?

The Company's use of

$$ has led to a

of its taxes as indicated by the $

x million amount in

the

$$ reserve.

The Company's cash savings from its inventory reporting method is $

$x$ million.