Melody Hannah, CFA is an equity analyst with a large pension fund. Her supervisor, asks her to write a report on Karp Inc. Karp prepares it financial statements in accordance with US GAAP. The supervisor is particularly interested in the effect of the company's use of the LIFO method to account for it inventory. For this purposes, Hannah collects the financial data presented in Exhibits 1 and 2.

Exhibit 1 Balance sheet Information (US $ Millions)

As of December	2018	2017
Cash and cash equivalents	172	157
Accounts receivable	626	458
Inventories	620	539
Other current assets	125	65
Total current Assests	1,543	1,219
Property Plant and Equipment, net	3,035	2,972
Total Assets	4,578	4,191
Total current liabilities	1,495	1,395
Long term debt	644	604
Total liabilities	2,139	1,999
Common stock and paid in capital	1,652	1,652
Retained earnings	787	540
Total shareholders' equity	2,439	2,192
Total liabilities and shareholders' equity	4,578	4,191

Exhibit 2 Income Statement Information (US $ Millions)

For the year ended December 31	2018	2017
Sales	4,346	4,161
Cost of Goods Sold	2,211	2,147
Depreciation and amortization expense	139	119
Selling, general and administrative expense	1,656	1,637
Interest expense	31	18
Income tax expense	62	48
Net income	247	192

Hannah finds the following information in the notes to the financial statements:

The LIFO reserves as of December 31, 2018 and 2017 are $155 million and $117 million respectively, and

The effective income tax rate applicable to Karp for 2018 and earlier periods is 20 percent.

Question 49 (1 point)

IF Karp had used FIFO instead of LIFO, the amount of inventory reported as of 31 December 2018 would have been closest to:

Question 49 options:

a)	$465 million
b)	$658 million
c)	$775 million

Question 50 (1 point)

If Karp had used FIFO instead of LIFO, which of the following ratios computed as of 31 December 2018 would most likely have been lower?

Question 50 options:

a)	Cash ratio
b)	Current ratio
c)	Gross profit margin

Question 51 (1 point)

If Karp had used FIFO instead of LIFO, its debt to equity ratio computed as of 31 December 2018 would have:

Question 51 options:

a)	Increased
b)	Decreased
c)	Remained unchanged