$7-75$ LIIF$0$ Reserve

Study Appendix $7$A$.$ Whirlpool Corporation reported $2011$ pretax operating profit of

$$792$ million. Footnotes to Whirlpool's financial statements read, "Inventories are stated at first$-$

in$,$ first$-$out $(\text{'}$FIFO$\text{'})$ cost$,$ except U$.$S$.$ production inventories, which are stated at last$-$in$,$ first$-$out

$(\text{'}$LIFO$\text{'})$ cost$."$ The footnote showed that if the FIFO method of inventory accounting had been

used for all inventories, they would have been $$203$ and $$149$ million higher than reported at

December $31,2011$ and $2010,$ respectively.

Calculate the $2011$ pretax income that Whirlpool would have reported if the FIFO inventory

method had always been used for all inventories.

Suppose Whirlpool's income tax rate is $34\%.$ What were Whirlpool's $2011$ income taxes

using LIFO? What would they have been if Whirlpool had used FIFO?

Was Whirlpool's use of LIFO a good choice from a tax perspective? What is the cumulative

financial effect of the choice?