Question

An annual report for International Paper Company included the following note:The last-in, first-out inventory method is used to value most of International Paper's U.S. inventories. If the first-in, first-out method had been used, it would have increased total inventory balances by approximately $ 350 million and $ 334 million at December 31,2011 , and 2010 , respectively.For the year 2011, International Paper Company reported net income (after taxes) of $ 1,341 million. At December 31, 2011, the balance of International Paper Company's retained earnings account was $ 3,330 million.Required:
(b) Determine the amount of retained earnings that International Paper would have reported at the end of 2011 if it always had used the FIFO method (assume a 30 percent tax rate).

Answer 1

FIFO method :

Amount of Net Ducome GA per F1 Fo

Net Income (After Tan) $2144 mule

Add Income Tan Changed

(2144 X 100/70) X 30%. 76                                                   $918.857 rude

                                                                                              $3062.857 nis                                                          

Add Closing Inventory Incrare as bei FIFO                              293

Lesso Open Deventory Ducres asper FIFO                        (290 nulls)

Income before Taxes                                                            3065.857 null

Income Taxes 30 y.                                                               (919.757 null)

Net Income                                                                            2146. to Pullen

FIFO ("first in, first out") is based on these production costs, assuming that the oldest products in a company's inventory are sold first. The LIFO (last in, first out) method assumes that the newest product in the company's inventory was sold first, and uses that cost instead.

FIFO (First In, First Out) Inventory Management evaluates inventory to reduce the likelihood of business losses when products are phased out or discontinued. LIFO (last in, first out) inventory management is suitable for non-perishable goods and uses the current price to calculate the cost of goods sold.

Learn more about FIFO at

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