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Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following footnote in its 10-K report. The company reports its inventories using the LIFO inventory costing method. December 31 (in millions) 2018 2017 $523 $465 161 141 731 703 (97) (89) $1,318 $1,220 Raw material Work-in-process Finished goods LIFO reserve Total inventories

Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following footnote in its 10-K report. The company reports its inventories using the LIFO inventory costing method. December 31 (in millions) 2018 2017 $523 $465 161 141 731 703 (97) (89) $1,318 $1,220 Raw material Work-in-process Finished goods LIFO reserve Total inventories

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following footnote in its 10-K report. The company reports its inventories using the LIFO inventory costing method. December 31 (in millions) 2018 2017 $523 $465 161 141 731 703 (97) (89) $1,318 $1,220 Raw material Work-in-process Finished goods LIFO reserve Total inventories
Transcribed Image Text:Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following footnote in its 10-K report. The company reports its inventories using the LIFO inventory costing method. December 31 (in millions) 2018 2017 $523 $465 161 141 731 703 (97) (89) $1,318 $1,220 Raw material Work-in-process Finished goods LIFO reserve Total inventories
(d) Assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereafter. ITW's LIFO reserve was $86 million at December 31, 2016. As of the 2018 year-end, how much has the company saved in taxes by choosing the LIFO over FIFO method for costing inventory? Round your answer to one decimal place. Use a negative sign with answer, if ITW paid more in taxes by choosing LIFO. $48.2 X (million) (e) What effect has the use of LIFO inventory costing had on ITW's pretax income and tax expense for 2018 only (assume a 21% income tax rate)? Round answers to one decimal place, when applicable. 2018 pretax income: decreased by $268 2018 tax expense: decreased by $ 97 x million. x million.
Transcribed Image Text:(d) Assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereafter. ITW's LIFO reserve was $86 million at December 31, 2016. As of the 2018 year-end, how much has the company saved in taxes by choosing the LIFO over FIFO method for costing inventory? Round your answer to one decimal place. Use a negative sign with answer, if ITW paid more in taxes by choosing LIFO. $48.2 X (million) (e) What effect has the use of LIFO inventory costing had on ITW's pretax income and tax expense for 2018 only (assume a 21% income tax rate)? Round answers to one decimal place, when applicable. 2018 pretax income: decreased by $268 2018 tax expense: decreased by $ 97 x million. x million.
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