Mineral Waters has used the FIFO cost flow assumption since it was first organized in 20X4. Results have been as follows:

	20X4	20X5	20X6	20X7
Reported net income - FIFO	$26,250	$45,000	$48,750	$67,500
Reported ending inventories - FIFO	82,250	142,000	164,000	173,000
Reported ending Inventories -Average cost	78,500	101,650	117,500	135,500

Required: 1. Restate net income assuming use of the average cost method since the company's inception. 2. What inventory cost flow policy would you expect this company to adopt if it was trying to: a. Minimize income tax payments. b. Report maximum inventory values on the balance sheet.

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