What cumulative effect has the use of LIFO had

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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

$5,296

$6,714

Finished product, service parts, etc.

9,873

10,542

Total inventories at FIFO

15,169

17,256

Less LIFO allowance

(1,280)

(1,470)

Total automotive and other inventories, less allowances

$13,889

$15,786

The company reports its inventory using the LIFO costing method during 2007 and 2008.

Required -

a. At what dollar amount are inventories reported on its 2008 balance sheet?

b. At what dollar amount would inventories have been reported in 2008 if FIFO inventory costing had been used?

c. What cumulative effect has the use of LIFO had, as of year-end 2008, on GM's pretax income, compared to the pretax income that would have been reported using the FIFO costing method?

d. Assuming a 35 % income tax rate, what is the cumulative effect on GM's tax liability as of year-end 2008?

Reference no: EM132884955

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