CFA Practice Question

CFA Practice Question

The following information can be found in Manufacturer Company's financial statements.

Net Income$125,000$100,000
Retained Earnings$500,000$400,000
LIFO Reserve$40,000$30,000
Tax Rate40%40%

If Manufacturer used FIFO its Net Income for fiscal 2008 would be ______.
A. $149,000
B. $135,000
C. $131,000
Explanation: Back out the effect of the change in the LIFO reserve: $125,000 + ((40,000 - 30,000) * (1-40%)) = $131,000

User Contributed Comments 1

User Comment
manju79 Expenses went down by 10,000 but saving is only 6000 as tax went up by 4000
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