Analyzing and Interpreting Income Manipulation Under the LIFO Inventory Method Pacific Company sells electronic test equipment that it acquires from a foreign source. During the year, the inventory records reflected the following:
Units Unit Cost Total Cost
Beginning inventory 20 $12,000 $240,000
Purchases 42 10,000 420,000
Sales (47 units at $24,500 each)
Inventory is valued at cost using the LIFO inventory method.
Required:
Complete the following income statement summary using the LIFO method and the periodic inventory system (show computations):
PACIFIC CAMPANY
Income Statement
For the Current Year Ended
Sales revenue
Cost of goods sold
Gross profit
Expenses
Pretax income
Ending inventory
2. The management, for various reasons, is considering buying 20 additional units before December 31, 2011, at $9,500 each. Restate the income statement (and ending inventory), assuming that this purchase is made on December 31, 2011.
3. How much did pretax income change because of the decision on December 31, 2011? Assuming that the unit cost of test equipment is expected to continue to decline in 2012, is there any evidence of income manipulation? Explain.

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept,the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year.to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51