Eckert Company Reported the Following Summarized Annual Data at the End

question 202

Essay

Eckert Company reported the following summarized annual data at the end of 2010:
*Based on an ending FIFO inventory of $250,000.
The income tax rate is 30%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $200,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on EcKert's income tax expense, net income, and cash flows?
(c) If you were an owner of this business, what would your reaction be to this proposed change?

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Definitions:

Intel

A multinational corporation and technology company known primarily for its semiconductor chips used in computer systems.

Time-Discounted Profits

The present value of future profits, taking into account the time value of money and the preference for receiving profits earlier rather than later.

Chip Production

The process of manufacturing integrated circuits (ICs) on semiconductor material like silicon.

Doomsday Machine

A hypothetical apocalyptic device capable of destroying all life on a planet, especially Earth, often used in discussions of nuclear war strategy.