The Following Note Appeared in the 2014 Annual Report of Edison

question 80

Essay

The following note appeared in the 2014 annual report of Edison Company:
Inventories

Inventories valued at LIFO comprised approximately 44% and 42% of inventories at December 31,2014 and 2013,respectively.
Required:
1.What basis do you believe Edison uses to account for its inventories internally?
2.Express your opinion as to why Edison reduces its inventories to LIFO cost.
3.If Edison did not adjust its inventories to LIFO cost,what would be the impact on Edison's
a.Net income before tax for 2013?
b.Retained earnings as of January 1,2014 (assuming a 34% tax rate)? Edison's reduction to LIFO cost in 2014 was $19.1 million.

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Definitions:

Adversity

Difficult or unpleasant situations or conditions that challenge one's well-being or survival.

Dysfunction

The impairment or abnormal functioning of a bodily system or organ.

Stress Reaction

The body's response to a threat or challenge, involving psychological and physiological changes to enhance coping ability.

Resilience

Denotes the ability to recover quickly from difficulties or adapt well in the face of adversity, trauma, or significant stress.