Inventories valued under the LIFO method were $765 million and $889 million at December 31, 2008 and 2007, respectively, net of the LIFO allowance. The LIFO allowance reflects the excess of the current cost of LIFO inventories at December 31, 2008 and 2007, over the amount at which these inventories were carried on the consolidated balance sheets. RAI recorded expense of $61 million, income of $12 million and expense of $2 million from LIFO inventory liquidations during 2008, 2007, and 2006, respectively.

Note 12 Income Taxes (In Part)

Required
a. Determine the change in net income for 2008 in comparison with the reported net income if
FIFO had been used for all inventory.
b. Compute the following for 2008 with no adjustments for LIFO reserve:
1. Days' sales in inventory
2. Working capital
3. Current ratio
4. Acid-test ratio
5. Debt ratio
c. Compute the measures in (b) considering the LIFO reserve (eliminate the LIFO reserve)
1. Days' sales in inventory
2. Working capital
3. Current ratio
4. Acid-test ratio
5. Debt ratio
d. Comment on the different results of the ratios computed in (b) and(c).

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For the Years Ended December 3 2008 2007 2006 Effective Tax Rate 37.1% 37.0% 37.2%