The following information related to ExxonMobil's inventories is taken from its 2014 annual report. 3. Miscellaneous Financial Information In 2014, 2013, and 2012, net income included gains of $187 million, $282 million, and $328 million respectively, attributable to the combined effects of LIFO inventory accumulations and drawdowns. The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $10.6 billion and $21.2 billion at December 31, 2014 and 2013, respectively Crude oil, products, and merchandise as of year-end 2014 and 2013 consist of the following ($ in billions) 2014 2013 Petroleum products $4.1 $3.9 Crude oil 4.6 4.7 Chemical products 2.9 2.9 Gas/other 0.8 0.6 Total $12.4 $12.1 Required: page 497 1. By how much would net income for 2014 have differed had ExxonMobil used FIFO to value those inventory items valued under LIFO? Assume a 35% marginal tax rate. Be sure to indicate whether FIFO income would be higher or lower than LIFO income 2. What would the LIFO reserve have been on December 31, 2014, if no drawdowns had occurred in 2014? The drawdowns represent LIFO liquidations 3. What was the net difference in 2014 income taxes that ExxonMobil experienced as a result of using LIFO rather than FIFO? Assume a 35% tax rate and indicate whether FIFO or LIFO would yield the higher tax and by how much 4. What was the approximate rate of change in input costs in 2014 for ExxonMobil's inventory?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

*Question included in picture.

The following information related to ExxonMobil's inventories is taken from its 2014 annual report.
3. Miscellaneous Financial Information
In 2014, 2013, and 2012, net income included gains of $187 million, $282 million, and $328 million
respectively, attributable to the combined effects of LIFO inventory accumulations and drawdowns. The
aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $10.6 billion
and $21.2 billion at December 31, 2014 and 2013, respectively
Crude oil, products, and merchandise as of year-end 2014 and 2013 consist of the following
($ in billions)
2014 2013
Petroleum products $4.1
$3.9
Crude oil
4.6
4.7
Chemical products
2.9
2.9
Gas/other
0.8
0.6
Total
$12.4 $12.1
Required:
page 497
1. By how much would net income for 2014 have differed had ExxonMobil used FIFO to value
those inventory items valued under LIFO? Assume a 35% marginal tax rate. Be sure to indicate whether
FIFO income would be higher or lower than LIFO income
2. What would the LIFO reserve have been on December 31, 2014, if no drawdowns had occurred in 2014?
The drawdowns represent LIFO liquidations
3. What was the net difference in 2014 income taxes that ExxonMobil experienced as a result of using LIFO
rather than FIFO? Assume a 35% tax rate and indicate whether FIFO or LIFO would yield the higher tax
and by how much
4. What was the approximate rate of change in input costs in 2014 for ExxonMobil's inventory?
Transcribed Image Text:The following information related to ExxonMobil's inventories is taken from its 2014 annual report. 3. Miscellaneous Financial Information In 2014, 2013, and 2012, net income included gains of $187 million, $282 million, and $328 million respectively, attributable to the combined effects of LIFO inventory accumulations and drawdowns. The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $10.6 billion and $21.2 billion at December 31, 2014 and 2013, respectively Crude oil, products, and merchandise as of year-end 2014 and 2013 consist of the following ($ in billions) 2014 2013 Petroleum products $4.1 $3.9 Crude oil 4.6 4.7 Chemical products 2.9 2.9 Gas/other 0.8 0.6 Total $12.4 $12.1 Required: page 497 1. By how much would net income for 2014 have differed had ExxonMobil used FIFO to value those inventory items valued under LIFO? Assume a 35% marginal tax rate. Be sure to indicate whether FIFO income would be higher or lower than LIFO income 2. What would the LIFO reserve have been on December 31, 2014, if no drawdowns had occurred in 2014? The drawdowns represent LIFO liquidations 3. What was the net difference in 2014 income taxes that ExxonMobil experienced as a result of using LIFO rather than FIFO? Assume a 35% tax rate and indicate whether FIFO or LIFO would yield the higher tax and by how much 4. What was the approximate rate of change in input costs in 2014 for ExxonMobil's inventory?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Database design
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education