Analyzing an inventory footnote

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Analyzing an Inventory Footnote Disclosure

General Electric Company reports the following footnote in its 10-K report.

December 31 (in millions)                             2012       2011

Raw materials and work in process          $ 9,295    $ 8,735

Finished goods 6,020     4,971

Unbilled shipments                                         378         485

15,693 14,191

Less revaluation to LIFO                                (398) (450)

$ 15,295            $ 13,741

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

(d) Assume GE has a 35% income tax rate. As of the 2012 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.)

$________(million)

(e) What effect has the use of LIFO inventory costing had on GE's pretax income and tax expense for 2012 only (assume a 35% income tax rate)? (Round answers to the nearest whole number.)

2012 pretax income:

increased by $__________ million.

2012 tax expense:

increased by $________ million.

Reference no: EM13912710

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