The Following Information Comes from the 2013 Occidental Petroleum Corporation

question 173

Essay

The following information comes from the 2013 Occidental Petroleum Corporation annual report to shareholders:
NOTE 4 INVENTORIES
Net carrying values of inventories valued under the LIFO method were approximately $205 million and $185 million at December 31, 2013 and 2012, respectively. Inventories consisted of the following: ($ in millions) The LIFO reserve indicates that inventories would have been $91 million and 101 million higher at the end of 2013 and 2012, respectively, if Occidental Petroleum had used FIFO to value its entire inventory.
Required:
If Occidental Petroleum had used FIFO to value its entire inventory how would its 2013 pre-tax income be affected?

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Definitions:

Common Shares

Equity securities that represent ownership in a company and usually carry voting rights.

Business Combination

The process of bringing two or more separate companies together under common control or ownership.

Negative Goodwill

Occurs when the purchase price of a company is less than the fair value of its net assets, often reflecting a bargain purchase.

Acquisition Method

An accounting approach used to consolidate the financial statements of two companies when one acquires control over the other.