P7-37: KROGER COMPANY P7-37. Analyzing Inventory Disclosure Comparing LIFO and FIFO The current asset section of the 2020 and 2019 fiscal year-end balance sheets of The Kroger Co. are presented in the accompanying table: ($ millions) Current assets Cash and temporary cash investments Store deposits in-transit Receivables FIFO inventory LIFO reserve. Assets held for sale Prepaid and other current assets Total current assets February 1, 2020 February 2, 2019 $ 399 $ 429 1,179 1,181 1,706 1,589 8,464 8,123 (1,380) (1,277) 166 522 592 $10,890 $10,803 In addition, Kroger provides the following disclosure note describing its inventory accounting policy (assume the following is their complete disclosure): Inventories are stated at the lower of cost (principally on a last-in, first-out "LIFO" basis) or market. In total, approximately 91% of inventories in 2019 and 90% of inventories in 2018 were valued using the LIFO method. The remaining inventories, including substantially all fuel inventories, are stated at the lower of cost (on a FIFO basis) or net realizable value. Replacement cost was higher than the carrying amount by $1,380 at February 1, 2020 and $1,277 at February 2, 2019. The Company fol- lows the Link-Chain, Dollar-Value LIFO method for purposes of calculating its LIFO charge or credit. e. REQUIRED a. b. C. At what dollar amount does Kroger report its inventory in its February 1, 2020, balance sheet? What is the cumulative effect (through February 1, 2020) of the use of LIFO on Kroger's pre- tax earnings? Assuming a 25% tax rate, what is the cumulative (through February 1, 2020) tax effect of the use of LIFO to determine inventory costs? d. Kroger reported net earnings of $1,512 million in its fiscal year 2020 income statement. Assuming a 25% 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 $95,294 million in fiscal year 2020. Compute its inventory turnover for the year. f. How would the inventory turnover ratio differ if the FIFO costing method had been used