Assume that prices that Deere and CNH Global pay for inventory typically increase over time. CNH uses the first-in, first-out (FIFO) cost flow assumption to measure its inventories. In general terms, how do the balance sheet values for inventories of the two companies differ due to their cost flow assumptions? What numbers on the two companies income statements would differ? What if prices typically decrease over time?

Deere & Company -Balance Sheet Deere & Company-Statement of Income 2012 2011 ASSETS Cash and cash equivalents Marketable securities Receivables from unconsolidated affiliates Trade accounts and notes receivable-net Financing receivables-net Financingreceivables securitized net Net Sales and Revenues Net sales Finance and interest income Other income S 4,652.2 3,647.2 533,500.9 $29,466.1 $23,573.2 1,98131,922.6 1,825.3 1,470.4 59.7 3,799.1 623.8 Total 36,157.1 32,012.5 26,004.6 22,159.1 19,923.5 2,905.0 1,790.9 1,330.6 Costs and Expenses Cost of sales Research and development expenses Selling, administrative and general expenses Interest expense Other operating expenses 3,617.6 ables 25,007.8 21,919.4 17,398.8 1,43361,226.2 1,052.4 3,417.0 3,168.7 2,968.7 811.4 Equipment on operating leases-net 2,527.8 5,170.0 4,370.6 4,352.3 201.7 759.4 716.0 782.8 5,011.9 215.0 921.2 y and equipment-net Investments in unconsolidated affiliates Total Other tangible assets-net Retirement benefits Deferred income taxes Income of Consolidated Group before Income Taxes Provision for income taxes Income of Consolidated Group Equity in income (loss)of unconsolidated affiliates Net Income 31,422.7 27,789.7 22,979.4 4,734.4 4,222.8 3,025.2 1,659.4 1,423.6 1,161.6 3,075.0 2,799.2 1,863.6 20.2 3,280.4 2,858.6 1,465.3 Total Assets S 56,265.8 $ 48,207.4 3,0716 2,807.8 1,874.3 Less: Net income attributable to noncontrolling activities Net Income Attributable to Deere & Company S 3,064.7 2,799.9 1,865.0 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Short-term borrowings Short-term securitization borrowings Payables to uncolsolidated affiliates Per Share Data Basic Diluted Dividends declared 5 7.72 $ 6.71 4.40 5 7.63 6.63 4.35 $ 1.79 1.52 1.16 3,574.82,777.4 7,804.8 168.3 22,453.1 16,959.9 6,712.1 49,403.8 41,392.5 8,988.9 counts payable and accrued e Deferred income taxes Long-ternm Retirement benefits and other liabilities Average Shares Outstanding Basic Diluted ings 417.4 422.4 7,694.9 Total Liabilities 401.5 428.6 STOCKHOLDERS' EQUITY Common stock, $1 par value (authorized-1,200,000,000 shares; issued 536,431,204 shares in 2012 and 2011), at paid-in amount Common stock in treaury, 148,625,875 shares in 2012 and 130,361,345 shares in 2011, at cost Retained Earnings Accumulated other comprehensive income (loss) 3251.7 (8,813.8) 7,292.8) 16,875.2 14,519.4 4,759.0) Retirement benefits adjustment Cumulative translation adjustment Unrealized loss on derivatives Unrealized gains on investments 453.8 11.9 3,678.0 6,842. 6,800.3 Accumulated other comprehensive income (loss) 571.5 Total Deere & Company stockholders' equity Total stockholders' equity Total Liabilities and Stockholders' Equity $ 56,265.8 $48,207.4