Question
Most inventories owned by Deere & Company and its U.S. equipment subsidiaries are valued at cost, on the last-in, first-out (LIFO) basis. Remaining inventories are
Most inventories owned by Deere & Company and its U.S. equipment subsidiaries are valued at cost, on the last-in, first-out (LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the first-in, first-out (FIFO) basis, or market. The value of gross inventories on the LIFO basis represented 66 percent and 65 percent of worldwide gross inventories at FIFO value at October 31, 2015 and 2014, respectively. If all inventories had been valued on a FIFO basis, estimated inventories by major classification at October 31 in millions of dollars would have been as follows:
$ millions | 2015 | 2014 |
---|---|---|
Raw materials and supplies | $1,559 | $1,724 |
Work-in-process | 450 | 654 |
Finished goods and parts | 3,234 | 3,360 |
Total FIFO value | 5,243 | 5,738 |
Less adjustment to LIFO value | 1,426 | 1,528 |
Inventories | $3,817 | $4,210 |
What effect has the use of LIFO inventory costing had on Deere's pretax income and tax expense for 2015 only (assume a 35% income tax rate)? (Round answers to one decimal place, if applicable.) 2015 pretax income INCREASED BY _________
2015 tax expense INCREASED BY ___________
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