Required: Assume Eli Witt's inventories have been valued on a LIFO basis for the last several years. 1. What would have been the effect on Culbro's pretax income for fiscal 2005 if Eli Witt's inventories had always been valued on a FIFO basis? (Show your work or provide an explanation!)

2. What would have been the effect on Culbro's retained earnings as of November 30, 2005, if Eli Witt's inventories had always been valued on a FIFO basis? (Use a 34 percent tax rate.) Do you see any problems with using the 34 percent tax rate? (Show your work and/or provide an explanation!)

3. Suppose Eli Witt had not experienced a liquidation of LIFO layers in either 2004 or 2005. What would the effect have been on Culbro's pretax income in 2005? Was the increase in Culbro's pretax income a welcome event?