a. What is the working capital at the end of 2008?

b. What is the balance in the LIFO reserve account at the end of 2008? Describe this account.

c. If the LIFO reserve account was added to the inventory at LIFO, what would be the resulting inventory number at the end of 2008? Which inventory amount do you consider to be more realistic?

d. Does the use of LIFO or FIFO produce higher, lower, or the same income during

(1) Price increases;

(2) Price decreases; and

(3) Constant prices? (Assume no decrease or increase in inventory quantity.)

e. Does the use of LIFO or FIFO produce higher, lower, or the same amount of cash flow during

(1) Price increases;

(2) Price decreases; and

(3) Constant costs? Answer the question for both pretax cash flows and after-tax cash flows. (Assume no decrease or increase in inventory quantity.)

f. Assume that the company purchased inventory on the last day of the year, beginning inventory equaled ending inventory, and inventory records for the item purchases were maintained periodically on the LIFO basis. Would that purchase be included on the income statement or the balance sheet at year-end?

g. Explain how liquidation of LIFO layers generates income.

AK STEEL HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS December 31,2008 and 2007 (Dollars in millions, except per share amounts) 2008 2007 ASSETS Current Assets: Cash and cash equivalents Accounts receivable, net Inventories, net Deferred tax asset Other current assets S 562.7 469.9 566.8 333.0 70.4 S 713.6 675.0 646.8 357.6 33.8 2.426.8 5,131.1 (3,065.2) 2,065.9 Total Current Assets Property, Plant, and Equipment Less accumu lated depreciation Property, plant, and equipment, net 5,282.1 (3,220.8) 2,061.3 Other Assets: Investment in AFSG Other investments Goodwill Other intangible assets Deferred tax asset Other 55.6 50.4 37.1 0.3 459.1 15.4 S 4,682.0 55.6 42.9 37.1 0.3 549.5 19.3 5,1974 TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable Accrued liabilities Current portion of pension and other postretirement S 348.1 233.0 S 588.2 214.0 benefit obligations 152.4 734.2 Total Current Liabilities 972.9 Noncurrent Liabilities: Long-term debt Pension and other postretirement benefit obligations Other liabilities 632.6 2,144.2 203.0 2.979.8 3.714.0 652.7 2,537.2 159.9 3.349.8 4,322.7 Total Noncurrent Liabilities TOTAL LIABILITIES Commitments and Contingencies (see Note 8)