GENERAL ELECTRIC COMPANY (GE) Note 1: Summary of Significant Accounting Policies Inventories. All inventories are stated at the lower of cost or realizable values. Cost for substantially all of GE's US. Inventories is determined on a last-in, first-out (LIFO) basis. Cost of other GE inventories is primarily determined on a first-in, first-out (FIFO) basis. ($ in millions) Note 11: GE Inventories (Adapted) December 31, Raw material and work in process. Year 6 Year 5 $4,894 $4,708 Finished goods Unbilled shipments Less revaluation to LIFO Refer to Note 1 above to answer Q1 and Q2. 4,379 372 9,645 3,951 312 8,971 (606) (676) $9,039 $8,295 a1 General Electric uses the (FIFO / Weighted Average / LIFO) inventory cost-flow assumption(s). (Circle all that apply.) Q2 Does the answer for Q1 comply with the Consistency Principle? (Yes/No) Explain. Refer to Note 11 above to answer Q3 through Q7. 03 On December 31, Year 6, the balance sheet would have reported inventories of ($9,645 / $9,039) million if the first-in, first-out (FIFO) method had been used to value all inventories and ($9,645 / $9,039) million if the last-in, first-out (LIFO) method were used to value the domestic portion of inventories. Q4 Circle the effect the LIFO cost-flow assumption has had on reported financial statement amounts since GE began operations. As a result of using LIFO, GE has reported: a. $606 million (more / less) in ending inventory. b. $606 million (more / less) in cost of goods sold (COGS). C. $606 million (more / less) in income before income tax. d. assuming a 40% tax rate, $242 million ($606 million x 40%) (more / less) in tax expense. Q5 The revaluation to LIFO (decreased / increased) from Year 5 to Year 6, which indicates there probably (was/was not) a LIFO liquidation. Q6 In a period of inflation, the cost-flow assumption resulting in the lowest taxable income is (FIFO / Weighted Average / LIFO). This tax benefit is achieved by allocating the higher, more current inventory costs to (COGS/ Ending Inventory). Q7 General Electric would appear more profitable if it used (FIFO / LIFO) to determine the value of all inventories. Would it really be more profitable? (Yes/No) Explain