General Electric Company reports the following footnote in its 10-K report.

December 31 (in millions)	2012	2011
Raw materials and work in process	$ 9,295	$ 8,735
Finished products	6,020	4,971
Uninvoiced shipments	378	485
	15,693	14,191
Less revaluation to LIFO	(398)	(450)
	$ 15,295	$ 13,741

The company reports its inventories using the LIFO inventory costing method.

(a) What is the balance of inventories reported in GE's 2012 balance sheet?

(b) What would GE's 2012 balance sheet for inventories have reported if the company had used FIFO inventory costing?

(c) What cumulative effect has GE's choice of LIFO over FIFO had on its year-end 2012 pre-tax income?

The cumulative effect is that pre-tax income has decreased. LIFO compares the most "current" inventory costs with current selling prices, thus avoiding the recognition of holding gains.

The cumulative effect is that the income before taxes has not changed. LIFO and FIFO are simply two different ways of accounting for inventories. Both methods lead to the same income before taxes.

The cumulative effect on pre-tax income is non-existent. The LIFO and FIFO methods of inventory accounting cause cash flow effects only and do not affect pre-tax income.

The cumulative effect is that income before taxes has increased. FIFO compares the most "current" inventory costs with current selling prices, thus avoiding the recognition of holding gains.

(d) Suppose GE has an income tax rate of 35%. At the end of 2012, how much has GE saved in taxes by choosing the LIFO method over the FIFO method to calculate the cost of inventory? Has the use of LIFO increased or decreased the accrued taxes paid by GE?

(e) What effect did using LIFO inventory costing have on GE's pre-tax income and tax expense for 2012 alone (assuming a 35% income tax rate)?