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Unformatted text preview: standard setting is the American Institute of Certified Public Accountants (AICPA). Chapter 8 Financial Statement Case a) Partial LIFO method Cost of goods sold: $475,476,000 LIFO difference = ($5,263,000 3,993,000) = (1,270,000) New Cost of goods sold: 474,206,000 New Income before taxes: $16,576,000 + 1,270,000 = $17,846,000 b) Income tax: $17,846,000 * .466 = $8,316,236 Net Income: $17,846,000 8,316,236 = $9,529,764 In my opinion, I feel that the difference in net income between the two methods is material because there is a difference of $681,764, which is almost 10%. That difference is worth the time and effort of changing the costing system. c) I do not feel that the use of different costing systems for different types of inventory means that there is a different physical flow of goods among the different types of inventory. The systems are used to determine costs and not the actual flow....
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- Spring '08