Question

Analyzing Inventory Footnote Disclosure General Motors Corporation reported the following information in its 10-K report: Inventories at December 31 ($ millions) 2008 2007 Productive material, work in process, and supplies $4,849 $6,267 Finished product, service parts, etc. 9,426 10,095 Total inventories at FIFO 14,275 16,362 Less LIFO allowance (1,233) (1,423) Total automotive and other inventories, less allowances $13,042 $14,939 The company reports its inventory using the LIFO costing method during 2007 and 2008. a. At what dollar amount are inventories reported on its 2008 balance sheet? million b. At what dollar amount would inventories have been reported in 2008 if FIFO inventory costing had been used? million

Answer 1

Ans :-

a). Balance in inventories reported on GE's 2008 balance sheet 13,042

b). GE's 2008 balance sheet have reported for inventories had the company used FIFO 14,275

C) Cumulative pre - tax income has been reduced by 14,275 - 13,042 = 1,233

Pretax Income = Inventory as per FIFO - Inventory as per LIFO $ 1233

d). Tax saving = $ 1,233 x 35% = 431.55