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The Moitch Company uses the LIFO inventory method. In 20X8, anticipating a downturn in demand, the company decides not to replenish inventory levels at year end. The resulting LIFO liquidation increases pretax income by $300,000. Ending inventory on December 31, 20X8, is $2,000,000, a reduction of $700,000 from the level at January 1, 20X8. Required: a. Compute the LIFO cost of inventory at January 1, 20X8. (2 point) b. Compute the additional purchases that would have been required to fully replenish inventories, thus avoiding the LIFO liquidation during 20X8. (4 points) c. Describe the impact of the LIFO liquidation on cash flow from operations, ignoring tax effect. (2 points) d. Describe how the foregoing data could be used to adjust reported income for 20X8. (2 points) e. Explain why net income as adjusted in part d is more useful for financial analysis. (2 points) The Moitch Company uses the LIFO inventory method. In 20X8, anticipating a downturn in demand, the company decides not to replenish inventory levels at year end. The resulting LIFO liquidation increases pretax income by $300,000. Ending inventory on December 31, 20X8, is $2,000,000, a reduction of $700,000 from the level at January 1, 20X8. Required: a. Compute the LIFO cost of inventory at January 1, 20X8. (2 point) b. Compute the additional purchases that would have been required to fully replenish inventories, thus avoiding the LIFO liquidation during 20X8. (4 points) c. Describe the impact of the LIFO liquidation on cash flow from operations, ignoring tax effect. (2 points) d. Describe how the foregoing data could be used to adjust reported income for 20X8. (2 points) e. Explain why net income as adjusted in part d is more useful for financial analysis. (2 points)

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