1. What would the balance sheet inventory amounts have been as of September 30, 2013 and 2012, if all inventories had been reported on a FIFO basis?
2. What criteria might Custom Manufacturing have used to decide that LIFO would be adopted for certain inventory categories while FIFO would be applied to others?
3. What is the meaning and significance of the liquidations mentioned in Custom Manufacturings inventory footnote?
4. If Custom Manufacturing had always used FIFO for all inventories, what difference would it have made in the 2013 income statement, 2013 balance sheet, and 2013 cash flow statement? In pondering that intriguing question, Gent realized she had to assume an income tax rate she chose to use 30% - and she also assumed all tax effects immediately affected cash (i.e., taxes payable were not affected).