C7-40: Exxon Mobil Corp. C7-40. Analyzing Effects of LIFO on Inventory Turnover Ratios The current assets of Exxon Mobil Corporation follow: ($ millions) Current assets Cash and cash equivalents Notes and accounts receivable, net. Inventories: Crude oil, products and merchandise.. Materials and supplies .... Other current assets. . . . Total current assets. . . 2020 2019 $ 4,364 $ 3,089 20,581 26,966 14,169 14,010 4,681 4,518 1,098 1,469 $44,893 $50,052 In addition, the following note was provided in its 2020 10-K report: Inventories. Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method-LIFO). Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred in bringing the inventory to its existing condition and location. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory cost. Inventories of materials and supplies are valued at cost or less. continued continued from previous page Miscellaneous Financial Information. In 2020, 2019, and 2018, net income included gains of $41 million, $523 million and $107 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 $5.4 billion and $9.7 billion at December 31, 2020, and 2019, respectively. REQUIRED a. b. C. Exxon Mobil reported a pretax loss of $28,883 million in 2020. What amount of pretax earn- ings would have been reported by the company if inventory had been reported using the FIFO costing method? Exxon Mobil reported cost of goods sold of $94,007 million in 2020. Compute its inventory turnover ratio for 2020 using total inventories. BP, p.l.c. (BP) reports its financial information using IFRS. For fiscal year 2020, BP reported cost of goods sold of $132,104 million, beginning inventory of $20,880 million and ending inventory of $16,873 million. Compute BP's inventory turnover ratio for fiscal year 2020. d. Compare your answers in parts b and c. BP can't use LIFO to report under IFRS, so revise your calculations in such a way as to find out which company has faster inventory turnover. e. What is meant by the statement that "2020 net income included gains of $41 million attribut- able to the combined effects of LIFO inventory accumulations and draw-downs"? LO ME