Joy Company uses the LIFO inventory valuation method and reports the following:

2019 Assets	2019 Inventory	2019 LIFO Reserve	2018 LIFO Reserve
$58,720	$3,776	$4,300	$2,900

Assume a tax rate of 25%. Convert to FIFO financial statements. Assume LIFO is allowed for tax purposes.

Required:

a.

Calculate the amount by which the following balance sheet items will increase or decrease for 2019:

Inventory, Total assets, Tax liabilities, and Equity. 8 marks

b.

Calculate the amount by which the following income statement items will increase or decrease for 2019:

CGS, Pretax income, Tax expense, and NI. 8 marks

c.

Compute the common-size inventories with LIFO and with FIFO for 2019. [Compute inventory as a percentage of total assets]. Do you believe the difference is material? Explain. 8 marks

Additional information for Joy Company:

2018 Assets	2019 Revenue	2018 Inventory	2019 CGS	2019 NI
$54,302	$102,354	$3,543	$79,409	$5,248

d.

Recast Inventory and CGS using FIFO for 2019. 6 marks

e.

Compute the following ratios for 2019, under both LIFO and FIFO, and comment on whether they differ materially:

Gross profit percentage, Days inventory outstanding, and ROA (= NI/TA).