Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following lootnote in its 10K report. The company reports its inventores using the LIFO inventory costing method. December 31 (in millions) 2018 2017 Rannaterial $523 5465 Work in process 161 141 Firtised goods 131 LIF reserve 1971 (89) Total wertories $1,218 51.220 (as What is the balance in inventories reported on ITW's 2018 balance sheet? million ib) What would ITW's 2018 balance sheet have reported for inventories had the company used FIFO inventory costing? $ million (c) What cumulative effect has ITW's choice of LIFO over FIFO had on its pretax income as of year end 2018? The cumulative effect is that pretax income has decreased. LIFO matches more "current" inventory costs against current selling prices, thus avoiding the recognition of holding gains. The cumulative effect is that pretax income has not changed. LIFO and FIFO are simply two different ways to account for inventarles. Both methods lead to the same pretax income. The cumulative ellel on prelax income is nonexistent. The LIFO and FIFO methods cl inventory accounting cause only tushllow ellects, and they do not affect prelax income. The cumulative effect is that pretax income has increased. LIFO matches more 'current'inventory costs against current selling prices, thus avoiding the recognition of holding gains. (d) assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereafter. IT'S LIFO reserve was $6 million at December 31, 2016. As of the 2015 year-end, how much has the company saved in taxes by choosing the LIFO over FIFO method for casting inventory? Round your answer to one decimal place. Use a negative sign with answer, if ITW paid more in taxes by choosing LIFO. s (million) (e) What effect has the use of LIFO inventory costing had on TW'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: Lys million 2018 tax expense: by $ million. Analyzing an Inventory Footnote Disclosure Illinois Tool Works reports the following lootnote in its 10K report. The company reports its inventores using the LIFO inventory costing method. December 31 (in millions) 2018 2017 Rannaterial $523 5465 Work in process 161 141 Firtised goods 131 LIF reserve 1971 (89) Total wertories $1,218 51.220 (as What is the balance in inventories reported on ITW's 2018 balance sheet? million ib) What would ITW's 2018 balance sheet have reported for inventories had the company used FIFO inventory costing? $ million (c) What cumulative effect has ITW's choice of LIFO over FIFO had on its pretax income as of year end 2018? The cumulative effect is that pretax income has decreased. LIFO matches more "current" inventory costs against current selling prices, thus avoiding the recognition of holding gains. The cumulative effect is that pretax income has not changed. LIFO and FIFO are simply two different ways to account for inventarles. Both methods lead to the same pretax income. The cumulative ellel on prelax income is nonexistent. The LIFO and FIFO methods cl inventory accounting cause only tushllow ellects, and they do not affect prelax income. The cumulative effect is that pretax income has increased. LIFO matches more 'current'inventory costs against current selling prices, thus avoiding the recognition of holding gains. (d) assume the company has a 35% income tax rate for years prior to 2017 and a 21% rate thereafter. IT'S LIFO reserve was $6 million at December 31, 2016. As of the 2015 year-end, how much has the company saved in taxes by choosing the LIFO over FIFO method for casting inventory? Round your answer to one decimal place. Use a negative sign with answer, if ITW paid more in taxes by choosing LIFO. s (million) (e) What effect has the use of LIFO inventory costing had on TW'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: Lys million 2018 tax expense: by $ million
