General Electric Company
Edited Inventory Note
(millions of dollars)
Raw materials and work in process $ 4,894 $ 4,708
Finished goods 4,379 3,951
Unbilled shipments 372 312
Less revaluation to LIFO (606) (676)
$ 9,039 $ 8,295
LIFO revaluations decreased $70 million in 2011, compared with decreases
of $169 million in 2010 and $82 million in 2009. Included in these changes
were decreases of $21 million, $8 million and $6 million in 2011, 2010 and
2009, respectively that resulted from lower LIFO inventory levels. There
were net cost decreases in each of the last three years. GE’s earnings before
income taxes were $18.891 billion in 2011. Assume a 35% marginal tax rate.
1. What are the total cumulative tax savings as of December 31, 2011 that
GE has realized as a result of using the LIFO inventory method?
2. What would GE’s pre-tax earnings have been in 2011 if it had been using
3. What December 31, 2011 balance sheet figures would be different and by
how much if GE had used FIFO to account for its inventories?
4. What were the LIFO liquidation profits reported in 2011 both pre-tax and
5. Explain what factors cause the difference between the LIFO pre-tax
income number and the FIFO pre-tax income number you estimated in
requirement 2. (Hint: Reconcile the change in the LIFO reserve for 2011.)