Assume the following inventory footnote was obtained from the Snapper Corporation 10-K ($ millions). Inventories Most inventories owned by Snapper and its United States 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 61 percent of worldwide gross inventories at FIFO value on October 31, 2016 and 2015, 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: Raw materials and supplies Work-in-process Finished machine and parts Total FIFO value 2016 Inventories $716 425 2,126 3,267 Less adjustment to LIFO value 632 $2,635 2015 $ 589 408 2,004 3,001 502 $2,499 We notice that not all of Snapper's inventories are reported using the same inventory costing method (companies can use different inventory costing methods for different inventory pools). What effect has the use of LIFO inventory costing had on Snapper's tax liability for 2016 only (assume a 35% income tax rate)?
Assume the following inventory footnote was obtained from the Snapper Corporation 10-K ($ millions). Inventories Most inventories owned by Snapper and its United States 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 61 percent of worldwide gross inventories at FIFO value on October 31, 2016 and 2015, 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: Raw materials and supplies Work-in-process Finished machine and parts Total FIFO value 2016 Inventories $716 425 2,126 3,267 Less adjustment to LIFO value 632 $2,635 2015 $ 589 408 2,004 3,001 502 $2,499 We notice that not all of Snapper's inventories are reported using the same inventory costing method (companies can use different inventory costing methods for different inventory pools). What effect has the use of LIFO inventory costing had on Snapper's tax liability for 2016 only (assume a 35% income tax rate)?
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter9: Working Capital
Section: Chapter Questions
Problem 31E
Related questions
Question
No handwritten please thank you
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College