Concept for Analysis 8-10 PLEASE SHOW WORK NOT JUST ANSWERS Concord Company is considering changing its inventory valuation method from FIFO to LIFO...
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Concept for Analysis 8-10 PLEASE SHOW WORK NOT JUST ANSWERS

Concord Company is considering changing its

inventory valuation method from FIFO to LIFO because of the potential tax savings. However, management wishes to consider all of the effects on the company, including its reported performance, before making the final decision.


The inventory account, currently valued on the FIFO basis, consists of 1,000,000 units at $8 per unit on January 1, 2017. There are 1,000,000 shares of common stock outstanding as of January 1, 2017, and the cash balance is $406,920.


The company has made the following forecasts for the period 2017-2019.



2017 2018 2019

Unit sales (in millions of units) 1.09 1.02 1.31


Sales price per unit $10 $12 $12


Unit purchases (in millions of units) 1.02 1.09 1.2


Purchase price per unit $8 $9 $10


Annual depreciation $300 $300 $300

(in thousands of dollars)


Cash dividends per share $0.15 $0.15 $0.15


Cash payments for additions $350 $350 $350

to and replacement of

plant and equipment (in thousands of dollars)


Income tax rate 40% 40% 40%


Operating expenses 15% 15% 15%

(exclusive of depreciation) as a

 percent of sales


Common shares outstanding 1 1 1

(in millions)


(a) Compute the following data for Concord Company under the FIFO and the LIFO inventory method for 2017-2019. Assume the company would begin LIFO at the beginning of 2017. (Enter amounts in thousands. Round earnings per share values to 2 decimal places, e.g. 52.75. Round other answers to 0 decimal places, e.g. 125.)


(1)

Year-end inventory balances.


(2)

Annual net income after taxes.


(3)

Earnings per share.


(4)

Cash balance.

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