2. The following note appeared in the 2018 annual report of Roca Company: Inventories Inventories (in millions) at...

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Accounting

2.        The following noteappeared in the 2018 annual report of Roca Company:
Inventories
Inventories (in millions) at December 31 consisted of:
2018
2017
Finished goods
$ 1,078.3
$     926.7
Raw materials and work-in-process
       716.2
       684.7
Supplies
         78.0
         65.6
Total (approximates current cost)
$ 1,872.5
$ 1,677.0
Reduction to LIFO cost
          –
         16.1
$ 1,872.5
$ 1,660.9
Inventories valued at LIFO comprised approximately 44% and 42%of inventories at December 31, 2018 and 2017, respectively.
2-1.
What basis do you believe Roca uses to account for itsinventories internally? WHY?
2-2.
Express your opinion as to why Roca reduces its inventories toLIFO cost.
2-3.
If Roca did not adjust its inventories to LIFO cost, what wouldbe the impact on Roca’s
a.
Net income before tax for 2017?
b.
Retained earnings as of January 1, 2018 (assuming a 34% taxrate)?

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21 The company has been using FIFO method of costing of inventories internally This is due to reason because in the given question LIFO reserve is created to bring the See Answer

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2. The following note appeared in the 2018 annual report of Roca Company: Inventories Inventories (in millions) at...

90.2K

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Accounting

Answer & Explanation Solved by verified expert

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Inventories (in millions) at December 31 consisted of:		2018	2017

	Finished goods	$ 1,078.3	$ 926.7
	Raw materials and work-in-process	716.2	684.7
	Supplies	78.0	65.6
	Total (approximates current cost)	$ 1,872.5	$ 1,677.0
	Reduction to LIFO cost	–	16.1
		$ 1,872.5	$ 1,660.9

2-1.	What basis do you believe Roca uses to account for itsinventories internally? WHY?
2-2.	Express your opinion as to why Roca reduces its inventories toLIFO cost.
2-3.	If Roca did not adjust its inventories to LIFO cost, what wouldbe the impact on Roca’s
	a.	Net income before tax for 2017?
	b.	Retained earnings as of January 1, 2018 (assuming a 34% taxrate)?