Below is the income statement and inventory footnote for Caterpillar Inc. for the fiscal year ending...
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Below is the income statement and inventory footnote for Caterpillar Inc. for the fiscal year ending December 31, 2017. Please answer the following two questions (show calculations to receive partial credit). (1) What would COGS have been if Caterpillar used FIFO instead of LIFO on the income statement? (2) What other account would you need to adjust (besides COGS) to calculate what Net Income (i.e., "Profit") would have been if Caterpillar used FIFO instead of LIFO on the income statement? STATEMENT 1 Consolidated Results of Operations for the Years Ended December 31 (Dollars in millions except per share data) Sales and revenues: Sales of Machinery, Energy & Transportation Revenues of Financial Products Total sales and revenues Operating costs: Cost of goods sold Selling, general and administrative expenses Research and development expenses Interest expense of Financial Products Goodwill impairment charge Other operating (income) expenses Total operating costs Operating profit Interest expense excluding Financial Products Other income (expense) S 2017 42,676 2,786 45,462 31,049 5,177 1,905 646 2,279 41,056 4,406 531 207 Operating costs: Cost of goods sold Selling, general and administrative expenses Research and development expenses Interest expense of Financial Products Goodwill impairment charge Other operating (income) expenses Total operating costs Operating profit Interest expense excluding Financial Products Other income (expense) Consolidated profit before taxes Provision (benefit) for income taxes Profit (loss) of consolidated companies Equity in profit (loss) of unconsolidated affiliated companies Profit (loss) of consolidated and affiliated companies Less: Profit (loss) attributable to noncontrolling interests Profit (loss) ¹ D. Inventories S 31,049 5,177 1,905 646 2,279 41,056 4,406 531 207 4,082 3,339 743 16 759 5 754 Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the last-in, first-out (LIFO) method. The value of inventories on the LIFO basis represented about 65 percent and 60 percent of total inventories at December 31, 2017 and 2016. If the FIFO (first-in, first-out) method had been in use, inventories would have been $1,934 million and $2,139 million higher than reported at December 31, 2017 and 2016, respectively. Below is the income statement and inventory footnote for Caterpillar Inc. for the fiscal year ending December 31, 2017. Please answer the following two questions (show calculations to receive partial credit). (1) What would COGS have been if Caterpillar used FIFO instead of LIFO on the income statement? (2) What other account would you need to adjust (besides COGS) to calculate what Net Income (i.e., "Profit") would have been if Caterpillar used FIFO instead of LIFO on the income statement? STATEMENT 1 Consolidated Results of Operations for the Years Ended December 31 (Dollars in millions except per share data) Sales and revenues: Sales of Machinery, Energy & Transportation Revenues of Financial Products Total sales and revenues Operating costs: Cost of goods sold Selling, general and administrative expenses Research and development expenses Interest expense of Financial Products Goodwill impairment charge Other operating (income) expenses Total operating costs Operating profit Interest expense excluding Financial Products Other income (expense) S 2017 42,676 2,786 45,462 31,049 5,177 1,905 646 2,279 41,056 4,406 531 207 Operating costs: Cost of goods sold Selling, general and administrative expenses Research and development expenses Interest expense of Financial Products Goodwill impairment charge Other operating (income) expenses Total operating costs Operating profit Interest expense excluding Financial Products Other income (expense) Consolidated profit before taxes Provision (benefit) for income taxes Profit (loss) of consolidated companies Equity in profit (loss) of unconsolidated affiliated companies Profit (loss) of consolidated and affiliated companies Less: Profit (loss) attributable to noncontrolling interests Profit (loss) ¹ D. Inventories S 31,049 5,177 1,905 646 2,279 41,056 4,406 531 207 4,082 3,339 743 16 759 5 754 Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the last-in, first-out (LIFO) method. The value of inventories on the LIFO basis represented about 65 percent and 60 percent of total inventories at December 31, 2017 and 2016. If the FIFO (first-in, first-out) method had been in use, inventories would have been $1,934 million and $2,139 million higher than reported at December 31, 2017 and 2016, respectively.
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Related Book For
Financial Accounting
ISBN: 9781618533111
6th Edition
Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman
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