The current asset section of the 2017 and 2016 fiscal year end balance sheets of The Kroger Co. are presented in the accompanying table:. February 3, January 28, (S millions) 2018 2017 Current assets Cash and temporary cash investments S 347 S 322 Deposis in-transit 1.161 910 Receivables 1,637 1.649 FIFO inventory 7,781 7,852 LIFO reserve (1.248) (1,291) Assets held for sale 604 âPrepaid and other current assets 835 898 Total current assets $11.117 510.340
In addition, Kroger provides the following footnote describing its inventory accounting policy (assume the following is their complete disclosure): Inventories are stated at the lower of cost (principally on a LIFO basis) or market. In total, approximately 93% of inventories in 2017 and 89% of inventories in 2016 were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the FIFO method. Replacement cost was higher than the carrying amount by $1,248 million at February 3, 2018 and $1,291 million at January 28, 2017. We follow the Link-Chain, Dollar-Value LIFO method for purposes of calculating our LIFO charge or credit.
Required:
a. At what dollar amount does Kroger report its inventory in its February 3, 2018, balance sheet?
b. What is the cumulative effect (through February 3, 2018) of the use of LIFO on Kroger's pretax earnings?
c. Assuming a 25% tax rate, what is the cumulative (through February 3, 2018) tax effect of the use of LIFO to determine inventory costs?
d. Kroger reported net earnings of $1,907 million in its fiscal year 2017 income statement. Assuming a 25% tax rate, what amount of net earnings would Kroger report if the company used the FIFO inventory costing method?
e. Kroger reported merchandise costs (cost of goods sold) of $95,662 million in fiscal year 2017. Compute its inventory turnover for the year.
f. How would the inventory turnover ratio differ if the FIFO costing method had been used?