Question 7. 7. The following refers to a firm who uses LIFO to value its inventory. (4 pts.) 2012 2011 Selected Balance Sheet Data: Merchandise inventories $ 24,000 $ 22,000 Total current assets 41,000 39,000 Total assets 85,000 75,000 Total current liabilities 25,000 24,000 Total long-term debt 30,000 30,000 Selected Income Statement Data: Net sales $360,000 $320,000 Cost of merchandise sold 295,000 260,000 Net income 4,200 4,500 Net income per common share $2.60 $2.80 Effective tax rate 40% 40% Selected partial note with 2012 financial statements: The company values its inventories using the LIFO method. The LIFO reserve was $10,000 and $7,000 at December 31, 2012, and December 31, 2011 respectively. Explain in plain words what an inventory reserve is. (2 pts.) What would inventory have been under FIFO for 2012? (2 pts.) (Points : 4)