Question textAnalyzing of Inventory and Footnote Disclosure The inventory footnote from Deere & Company’s recent 10-K follows ($ millions). 15. INVENTORIES A majority of inventory owned by Deere & Company and its US 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 net realizable value. The value of gross inventories on the LIFO basis at October 28, Year 2 and October 29, Year 1 represented 54 percent and 61 percent, respectively, of worldwide gross inventories at FIFO value. If all inventories had been valued on a FIFO basis, estimated inventories by major classification at October 28, Year 2 and October 29, Year 1 in millions of dollars would have been as follows: [table] | Year 2 | Year 1 Raw materials and supplies | $2,233 | $1,688 Work-in-process | 776 | 495 Finished goods and parts | 4,777 | 3,182 Total FIFO value | 7,786 | 5,365 Less adjustment to LIFO value | (1,637) | (1,461) Inventories | $6,149 | $3,904 [/table] We note that not all of Deere's inventories are reported using the same inventory costing method (companies can use different inventory costing methods for different inventory pools). a. At what dollar amount are Deere’s inventories reported on its Year 2 balance sheet? $Answer 1[input]CorrectMark 1.00 out of 1.00 million b. At what dollar amount would inventories have been reported on Deere’s Year 2 balance sheet had it used FIFO inventory costing? $Answer 2[input]CorrectMark 1.00 out of 1.00 million c. What cumulative effect has the use of LIFO inventory costing had, as of year-end Year 2 on its pretax income compared with the pretax income it would have reported had it used FIFO inventory costing? (Show an increase as a positive number and a decrease as a negative number.) $Answer 3[input]CorrectMark 1.00 out of 1.00 million d. Assuming a 25% income tax rate, by what cumulative dollar amount has Deere’s tax liability been affected by use of LIFO inventory costing as of year-end of Year 2? Has the use of LIFO inventory costing increased or decreased its cumulative tax liability? (Show an increase as a positive number and a decrease as a negative number. Round your answer to one decimal place.) $Answer 4[input]CorrectMark 1.00 out of 1.00 million e. What effect has the use of LIFO inventory costing had on Deere’s pretax income and tax liability for Year 2 (assume a 25% income tax rate)? (Show an increase as a positive number and a decrease as a negative number. Round your answers to one decimal place.) Pretax income: $Answer 5[input]CorrectMark 1.00 out of 1.00 million Tax liability: $Answer 6[input]CorrectMark 1.00 out of 1.00 million