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Analyzing an Inventory Footnote Disclosure General Electric Company reports the following footnote in its 10-K report....

Analyzing an Inventory Footnote Disclosure
General Electric Company reports the following footnote in its 10-K report.

December 31 (in millions) 2010 2009
Raw materials and work in process $ 6,973 $ 7,581
Finished goods 4,435 4,105
Unbilled shipments 456 759
11,864 12,445
Less revaluation to LIFO (404) (529)
$ 11,460 $ 11,916


The company reports its inventories using the LIFO inventory costing method.

(a) What is the balance in inventories reported on GE's 2010 balance sheet? 11,460 million

(b) What would GE's 2010 balance sheet have reported for inventories had the company used FIFO inventory costing?
11,864 million

(c)  Assume GE has a 35% income tax rate. As of the 2010 year-end, how much has GE saved in taxes by choosing LIFO over FIFO method for costing inventory? (Round your answer to the nearest whole number.)141 million

Has the use of LIFO increased or decreased GE's cumulative taxes paid?

decreased


(d) What effect has the use of LIFO inventory costing had on GE's pretax income and tax expense for 2010 only (assume a 35% income tax rate)? (Round answers to the nearest whole number.)
2010 pretax income:

increased

by $125 million.


2010 tax expense:

increased

*****by ___________ million.

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Answer #1
a.balance in inventories reported on GE's 2010 balance sheet $ 11,460.00
b. balance sheet have reported for inventories had the company used FIFO inventory costing? $ 11,864.00
c. Tax rate Amount
LIFO $ 11,460.00 35% $ 4,011.00
FIFO $ 11,864.00 35% $ 4,152.40
Savings in taxes $     (404.00) $   (141.40)
d.
Pre tax income increased by $        125.00
529-404
Tax expense increased by $          43.75
125*0.35
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