Analyzing Inventories Using LIFO Inventory Disclosure Note

The disclosure note below is from the $202010-$K report of Casey's General Stores, Inc., an

operator of convenience stores $($ $ thousands$).$

Inventories

Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For

fuel, cost is determined through the use of the first$-$in$,$ first$-$out $($FIFO$)$ method. For merchandise

inventories, cost is determined through the use of the last$-$in$,$ first$-$out $($LIFO$)$ method. The excess of

replacement cost over the stated LIFO value was $$87,546$ and $$80,814$ at April $30,2020$ and $2019,$

respectively. There were no material LIFO liquidations during the period presented. Below is a

summary of the inventory values at April $30,2020$ and $2019.$

In $2020,$ Casey's General Stores reported sales revenue of $$9,175\mathrm{.}3$ million and cost of goods sold of

$$7,030\mathrm{.}6$ million.

a$.$ Calculate the amount of inventories purchased by Casey's General Stores in $2020.$ Round

intermediate calculations and answers to one decimal place.

& million.

b$.$ What amount of gross profit would Casey's General Stores have reported if the FIFO method had

been used to value all inventories in $2020.$ Round intermediate calculations and answer to one

decimal place.

q

million

c$.$ Calculate the gross profit margin $($GPM$)$ as reported and assuming that the FIFO method had

been used to value all inventories. Round answers to two decimal places $($i$.$e$.,0\mathrm{.}15785=15\mathrm{.}79\%)$

As reported

$\%$

Under FIFO

$\%$ A majority of inventory owned by Deere & Company and its U$.$S$.$ equipment subsidiaries are valued at cost$,$ on the "last$-$in$,$ first$-$out" $($LIFO$)$ basis. Remaining

inventories are generally valued at the lower of cost$,$ on the "first$-$in$,$ first$-$out" $($FIFO$)$ basis, or net realizable value. The value of gross inventories on the LIFO basis

at November $1,2020$ and November $3,2019$ represented $52$ percent and $55$ percent, respectively, of worldwide gross inventories at FIFO value. The pretax

favorable income effect from the liquidation of LIFO inventory during $2020$ was $$33$ million. If all inventories had been valued on a FIFO basis, estimated

inventories by major classification at November $1,2020$ and November $3,2019$ in millions of dollars would have been as follows:

We note that not all of Deere's inventories are reported using the same inventory costing method $($companies can use different inventory costing methods for

different inventory pools$).$

a$.$ At what dollar amount are Deere's inventories reported on its $2020$ balance sheet?

$ million

b$.$ At what dollar amount would inventories have been reported on Deere's $2020$ balance sheet had it used FIFO inventory costing?

q million

c$.$ What cumulative effect has the use of LIFO inventory costing had, as of year$-$end $2020,$ on its pretax income compared with the pretax income it would have

reported had it used FIFO inventory costing?

$($Show an increase as a positive number and a decrease as a negative number.$)$

$$,$ million

d$.$ Assuming a $25\%$ income tax rate, by what cumulative dollar amount has Deere's tax liability been affected by use of LIFO inventory costing as of year$-$end

$2020?$

$($Show an increase as a positive number and a decrease as a negative number. Round your answer to one decimal place.$)$

$ million

e$.$ What effect has the use of LIFO inventory costing had on Deere's pretax income and tax liability for $2020($assume a $25\%$ income tax rate$)?$

$($Show an increase as a positive number and a decrease as a negative number. Round your answers to one decimal place.$)$

Pretax income: $ $,$ million

$\begin{array}{cc}\text{T}\text{a}\text{x}\text{l}\text{i}\text{a}\text{b}\text{i}\text{l}\text{i}\text{t}\text{y}\text{:}\text{\$}& \text{m}\text{i}\text{l}\text{l}\text{i}\text{o}\text{n}\end{array}$Determining Lower of Cost or Net Realizable Value $($NRV$)$

The following data refer to Froning Company's ending inventory.

Determine the ending inventory amount by applying the lower of cost or net realizable value rule to:

$($a$)$ each item of inventory

$q$

$($b$)$ the total inventory.

$