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Assume General Electric Company reports the following footnote in its 10-K report. December 31 (In millions) 2016 2015 Raw materials and work in process $ 5,527 $ 5,042 Finished goods 5,152 4,806 Unbilled shipments 333 402 11,012 10,250 Less revaluation to LIFO (697) (661) $10,315 $ 9,589 The company reports its inventories using the LIFO inventory costing method. Assume GE has a 35% income tax rate. As of the 2016 year-end, how much has GE saved in taxes by choosing LIFO over FIFO method for costing inventory

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Answer:

$ 244 million

Explanation:

Calculation for how much has GE saved in taxes by choosing LIFO over FIFO method for costing inventory

Tax rate Amount (In millions)

LIFO $ 10,315.00 35% =$ 3,610.25

FIFO $ 11,012.00 35% =$ 3,854.20

Savings in taxes $ (697.00) $ (243.95)

Hence,

Savings in taxes=$ 3,610.25 million-$ 3,854.20 million

Savings in taxes=($243.95 million)

Savings in taxes=($ 244 million) Approximately

Therefore the amount that GE saved in taxes by choosing LIFO over FIFO method for costing inventory will be $ 244 million