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.