The Following Information Comes from the 2007 Occidental Petroleum Corporation $$\begin{array}{l}&2007&2006\\\text { Total }&\$910&\$825\end{array}$$

question 93

Essay

The following information comes from the 2007 Occidental Petroleum Corporation annual report to shareholders:
NOTE 5 INVENTORIES
Inventories of approximately $190 million and $204 million were valued under the LIFO method at December 31, 2007 and 2006, respectively. Inventories ($ in millions) were:
Also, the footnote indicated that the LIFO reserve was $102 million and $74 million at the end of 2007 and 2006, respectively. The LIFO reserve indicates that inventories would have been $102 million and $74 million higher at the end of 2007 and 2006, 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 2007 pre-tax income be affected?
$$\begin{array}{l}&2007&2006\\\text { Total }&\$910&\$825\end{array}$$

---

Definitions:

Corporate Pretax Profits

Earnings generated by a corporation before taxes are deducted, often used as a measure of a company's financial performance.

Proprietors' Income

The income earned by the owners of unincorporated businesses from their business activities.

Present Value

The value today of a sum of money or sequence of cash flows expected in the future, discounted by a certain rate of return.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.