P 8-8 Supplemental LIFO disclosures; CaterpillarLO8-4,LO8-6Real World FinancialsCaterpillar, Inc., is one of the world's largest manufacturers of construction, mining, andforestry machinery. The following disclosure note is included in the company's 2019 financialstatements:C. Inventories ($ in millions)Inventories are stated at the lower of cost or net realizable value. Cost isprincipally determined using the last-in, first-out (LIFO) method. The value ofinventories on the LIFO basis represented about 60 percent and 65 percent oftotal inventories at December 31, 2019 and 2018, respectively. If the FIFO (first-in,first-out) method had been in use, inventories would have been $2,086 millionand $2,009 million higher than reported at December 31, 2019 and 2018,respectively.Required:1. The company reported LIFO cost of goods sold of $36,630 million. Calculate the amountthat would be reported for cost of goods sold had Caterpillar used the FIFO inventorymethod for all of its inventory during 2019.2. How does the amount in requirement 1 affect income before taxes?3. Why might the information contained in the disclosure note be useful to a financial analyst?

It is the stock held for sale to customers. The inventory comprises of raw materials, work in…

Answered: Caterpillar, Inc., is one of the…

Caterpillar, Inc., is one of the world's largest manufacturers of construction, mining, and forestry machinery. The following disclosure note is included in the company's 2019 financial statements:

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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