The Following Information Can Be Found in ABC Co Assume a Tax Rate of 35

question 5

Multiple Choice

The following information can be found in ABC Co.'s financial statements.
$\begin{array}{lrr}&\underline{ 2006}&\underline{ 2005}\\\text { Finished goods } & \$ 251,690 & \$ 195,360 \\\text { Work-in-process and } & & \\\text { purchased parts } & 245,123 & 186,432 \\\text { Raw materials } & 136,568 & 106,789 \\\text { Total FIFO value } & 633,381 & 488,581 \\\begin{array}{l}\text { Less excess of current } \\\text { cost over stated LIFO }\end{array} & & \\\text { value } &\underline{ 62,951}&\underline{71,186} \\\text { Inventories } & \$570,430&\$417,395\\\text { Retained earnings }&\$3,526,000&\$3,159,000\end{array}$
Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories.
-What will be the retained earnings for 2006 if ABC used FIFO valuation?

• A)$3,205,271
• B)$3,566,918
• C)$3,893,000
• D)$4,096,430

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Definitions:

Call's Value

The intrinsic value of a call option, reflecting the difference between the underlying asset's price and the strike price of the option, if positive.

Exercise Price

The price at which the holder of an option can buy (call) or sell (put) the underlying asset or security.

May 40 Put

A put option contract with a strike price of $40, expiring in May, giving the holder the right to sell the underlying asset at this price.