STEELMAKING
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AK STEEL HOLDING CORPORATION* |
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2008 |
2007 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
$562.70 |
$713.60 |
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Accounts receivable, net |
469.9 |
675 |
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Inventories, net |
566.8 |
646.8 |
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Deferred tax asset |
333 |
357.6 |
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Other current assets |
70.4 |
33.8 |
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Total Current Assets |
2,002.80 |
2,426.80 |
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Property, Plant, and Equipment |
5,282.10 |
5,131.10 |
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Less accumulated depreciation |
3,220.80 |
3,065.20 |
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Property, plant, and equipment, net |
2,061.30 |
2,065.90 |
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Other Assets: |
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Investment in AFSG |
55.6 |
55.6 |
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Other investments |
50.4 |
42.9 |
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Goodwill |
37.1 |
37.1 |
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Other intangible assets |
0.3 |
0.3 |
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Deferred tax asset |
459.1 |
549.5 |
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Other |
15.4 |
19.3 |
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TOTAL ASSETS |
$4,682.00 |
$5,197.40 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
$348.10 |
$588.20 |
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Accrued liabilities |
233 |
214 |
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Current portion of pension and other postretirement |
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benefit obligations |
152.4 |
158 |
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Total Current Liabilities |
734.2 |
972.9 |
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Noncurrent Liabilities: |
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Long term debt |
632.6 |
652.7 |
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Pension and other postretirement benefit obligations |
2,144.20 |
2,537.20 |
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Other liabilities |
203 |
159.9 |
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Total Noncurrent Liabilities |
2,979.80 |
3,349.80 |
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TOTAL LIABILITIES |
3,714.00 |
4,322.70 |
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Stockholders’ Equity: |
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Preferred stock, authorized 25,000,000 shares |
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Common stock, authorized 200,000,000 shares of $.01 par value each; issued 2008, 121,105,429 shares, 2007, 20,302,930 shares; outstanding 2008, 110,394,774 shares; 2007, 111,497,682 shares |
1.2 |
1.2 |
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Additional paid in capital |
1,898.90 |
1,867.60 |
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Treasury stock, common shares at cost, 2008, 10,710,655; 2007, 8,805,248 shares |
150.8 |
126.8 |
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Accumulated deficit |
940.9 |
915.1 |
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Accumulated other comprehensive loss |
159.6 |
47.8 |
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TOTAL STOCKHOLDERS’ EQUITY |
968 |
874.7 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$4,682.00 |
$5,197.40 |
Required
a. What is the working capital at the end of 2008?
b. What is the balance in the LIFO reserve account at the end of 2008? Describe this account.
c. If the LIFO reserve account was added to the inventory at LIFO, what would be the resulting inventory number at the end of 2008? Which inventory amount do you consider to be more realistic?
d. Does the use of LIFO or FIFO produce higher, lower, or the same income during (1) price increases; (2) price decreases; and (3) constant prices? (Assume no decrease or increase in inventory quantity.)
e. Does the use of LIFO or FIFO produce higher, lower, or the same amount of cash flow during (1) price increases; (2) price decreases; and (3) constant costs? Answer the question for both pretax cash flows and after tax cash flows. (Assume no decrease or increase in inventory quantity.)
f. Assume that the company purchased inventory on the last day of the year, beginning inventory equaled ending inventory, and inventory records for the item purchases were maintained periodically on the LIFO basis. Would that purchase be included on the income statement or the balance sheet at year end?
g. Explain how liquidation of LIFO layers generates income.