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Preparing and Analyzing Inventory Disclosures The LIFO inventory records of Higgins Corporation indicated the following at December 31, 2018 Units Cost per unit Total Cost Beginning inventory 1/1/18 7,500 $.90 $ 6,750 2.500 1.30 3,250 Purchases 3/2/18 10,500 7.00 73,500 9/30/18 13,500 7.00 94.500 Available for sale 34,000 $178,000 The company follows the periodic inventory method and assumes a LIFO cost flow assumption. An ending inventory revealed 7,000 units at December 31, 2018. The 27,000 units sold during the year were soldfor $12 per unit. Assume selling, general and administrative expenses of $40,000 and a tax rate of 35%. Higgins prepares their financial statements annually on December 31. Assume LIFO reserve at 12/31/2017 was $60,000 Original: a. Prepare an income statement for the year ending December 31, 2018 under LIFO. b. Calculate ending inventory to be reported on the balance sheet at December 31, 2018 under LIFO. c. What is the current cost value of ending inventory at December 31, 2018? Expansion: d. Compute the gross profit margin for the year ending 12/31/2018. e. Calculate the gross profit margin based on current selling price and current costs. Why does differ from part d? f. What is the dollar amount effect of the LIFO liquidation on gross profit (i.e., what are the pre-tax LIFO Liquidation gains or profits)? g. The CFO of Higgins Corporation is upset with the purchasing manager, who was supposed to make an additional purchase of inventory of 5,000 units at $7.00 per unit in December 2018. The purchasing manager forgot to make the purchase, resulting in a partial LIFO liquidation of the base layer of inventory. Calculate the additional taxes Higgins paid in 2018 resulting from the purchasing manager's mistake. h. If Higgins had chosen FIFO, what would be reported for Ending Inventory on the balance sheet at 12/31/2018? . Compute the LIFO reserve at 12/31/2018. j. Quantify the cumulative tax savings as of 12/31/2018 to the firm for following LIFO