P7-34. Analyzing Inventory Disclosure Comparing LIFO and FIFCO 5 The current asset section of the 2014 and 2013 fiscal year end balance sheets of The Kroger Co. are presented in th MBC e accompanying table roger January 31, February 1 ($ millions) Current assets Cash and temporary cash investments..... . . . . . . . . .. . . . ..268 Receivables FIFO inventory . . . Prepaid and other current assets........ . . . . . . . . . . 0 0 In addition, Kroger provides the following footnote describing its inventory accounting policy (as sume the following is their complete disclosure) 4 Chapter 7 Reporting and Analyzing Inventory Inventories are stated at the lower of cost (principally on a LIFO basis) or market. In total, approximately 95% of inventories in 2014 and 2013 were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the FIFO method. Replace- ment cost was higher than the carrying amount by $1,245 million at January 31, 2015 and $1,150 million at February 1, 2014. We follow the Link-Chain, Dollar-Value LIFO method for purposes of calculating our LIFO charge or credit REQUIRED 9 At what dollar amount does Kroger report its inventory in its January 31,2015, balance sheet? What is the cumulative effect (through January 31,2015) of the use of LIFO on Kroger's pretax earnings? Assuming a 35% tax rate, what is the cumulative (through January 31, 2015) tax effect of the use of LIFO to determine inventory costs? a. b. C. d. Kroger reported net earnings of $1,728 million in its fiscal year 2014 income statement. Assuming a 35% tax rate, what amount of net earnings would Kroger report if the company used the FIFO inventory costing method? Kroger reported merchandise costs (cost of goods sold) of $85,512 million in fiscal year 2014 Compute its inventory turnover for the year How would the inventory turnover ratio differ if the FIFO costing method had been used? e. f