Inventories Gardner Denver The questions below relate to the attached excerpts from Gardner Denver’s 2005 10-K filing. Before proceeding, review the following excerpt from the 10-K that describes the business activities of Gardner Denver, Inc.:

1. What inventory cost flow assumptions are used at Gardner Denver? Both LIFO and FIFO

2. What factors are considered when management evaluates whether inventory write downs are necessary? Recent sales history, predicted trends, industry market conditions and general economic conditions.

3. What is the carrying value of total inventory as of 12/31/2005? What is the

carrying value of total inventory for each of the cost flow assumptions used by Gardner Denver? Carrying Value = $207.326 million. $144.3 million was accounted for on a FIFO basis, while the remaining $63.0 million was accounted for on a LIFO basis.

4. If all inventory was accounting for on a FIFO basis, what would value would reported inventory had been at 12/31/2005?

Inventory on FIFO basis of $144.3 million does not change. Inventory of $63.0 million on a LIFO basis + LIFO reserve = FIFO basis. $63.0 million LIFO value + $6.3 million LIFO reserve = $69.3 million. So if ALL inventory was accounted for on a FIFO basis, the value of the inventory on the balance sheet would be $144.3 + $69.3 = $213.6

5. What amount of cost of goods sold did Gardner Denver report for fiscal year 2005?

Per the income statement, cost of goods sold is labeled “cost of sales” and equals $813.227 million (or $813,227 thousand).

6. What amount of cost of goods sold would Gardner Denver have reported for

fiscal year 2005 if all inventory was accounted for on a FIFO basis?

COGS under LIFO – COGS under FIFO = change in LIFO reserve. LIFO reserve in 2005 – LIFO reserve in 2004 = 6.253 million – 4.817 million = 1.436 million. COGS under LIFO – COGS under FIFO = 1.436 million 813.227 – COGS under FIFO = 1.436 million COGS under FIFO = 813.227 – 1.436 = 811.791 million.

7. Quantify the effect LIFO liquidations had on reported net income in fiscal year

2004. LIFO liquidations had the effect of increasing net income by $94 thousand dollars.