Loos McGoos Company uses FIFO and records inventory at lower of cost or market, on an individual item basis. Loos McGoos has the following items in its ending inventory at December 31, 20X8:

           Quantity                Cost                      Replacement Cost, 12/31/X8               Selling Price                   Selling Expenses

Moos 1,150                       4.25                                  3.75                                                4.40                                    0.40

Siloos  890                      3.30                                 3.00                                                3.90                                    0.30

Chickadoos  2,340         2.80                                 2.60                                                2.90                                    0.20

Required: a) Determine the value of ending inventory at December 31, 20X8. SHOW ALL CALCULATIONS FOR FULL CREDIT and label your answer!!

b) Explain the definition of net realizable value and discuss why GAAP does not allow inventory to be valued above net realizable value on the balance sheet.

c) If Loos McGoos used LIFO instead of FIFO for both financial reporting and tax purposes, what would the effect be on each of the following BASED ON THE INFORMATION YOU HAVE IN THIS PROBLEM. You should have a very short answer for each of these.

Ending inventory value? 

Cost of goods sold? 

Income tax expense?

Statement of cash flows?