The following e-mail just arrived from the company president addressed to you as the new chief financial officer (CFO).
DATE: May 1, Year 5
TO: CFO
FROM: President
RE: Analysis of LIFO
I just received the following e-mail from the Chairman of the Board of Directors:
I am convening an emergency board meeting to begin in one hour. I have just accessed our information systems on-line financial results for the year ended yesterday. At the board meeting at the end of the third quarter profit was on budget but now for the whole year net income is more than double what we expected. This makes no sense as we had no production in the fourth quarter due to the continuing strike by our factory personnel.
If this higher net income is accurate it will likely increase our stock price which in turn will affect our merger agreement with Other Company.
As President, you need to explain this higher net income to the Board.
Could our using LIFO have something to do with this situation? I need an analysis (AND if the increased net income is correct, whether this situation could have been foreseen) to present to the board an hour from now.
Prepare the requested response concerning the increase in income and the use of LIFO.