d. Assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereaft ITW's LIFO reserve was $86 million at December 31, 2016. As of the 2018 year-end, how much the company saved in taxes by choosing the LIFO over FIFO method for costing inventory? Has t. use of LIFO increased or decreased the company's cumulative taxes paid? e. What effect has the use of LIFO inventory costing had on the company's pretax income and tax pense for 2018 only (assume a 21% income tax rate)?
d. Assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereaft ITW's LIFO reserve was $86 million at December 31, 2016. As of the 2018 year-end, how much the company saved in taxes by choosing the LIFO over FIFO method for costing inventory? Has t. use of LIFO increased or decreased the company's cumulative taxes paid? e. What effect has the use of LIFO inventory costing had on the company's pretax income and tax pense for 2018 only (assume a 21% income tax rate)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please Answer question subpart d and e alone . Asap
Transcribed Image Text:E6-26.
Analyzing an Inventory Footnote Disclosure
Illinois Tool Works reports the following footnote in its 10-K report. The company reports its inve
ries using the LIFO inventory costing method.
Deceeber 31 ($ millions)
2018
2017
Raw material. .
Work-in-process
Finished goods.
LIFO reserve.
$ 523
$ 465
161
141
731
703
(97)
(89)
Total inventories.
$1,318
$1,220
a. What is the balance in inventories reported on the 2018 balance sheet?
b. What would the 2018 balance sheet have reported for inventories had the company used FIIFO inven-
tory costing?
c. What cumulative effect has the company's choice of LIFO over FIFO had on its pretax income as of
year-end 2018? Explain.
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? Has the
use of LIFO increased or decreased the company's cumulative taxes paid?
e. What effect has the use of LIFO inventory costing had on the company's pretax income and tax ex-
pense for 2018 only (assume a 21% income tax rate)?
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