General Motors Corporation reported the following information in its 10-K report: Inventories at December 31 ($ millions) 2008 2007
Productive material, work in process, and supplies $4,849 $6,267
Finished product, service parts, etc. 9,426 10,095
Total inventories at FIFO 14,275 16,362
Less LIFO allowance (1,233) (1,423)
Total automotive and other inventories, less allowances $13,042 $14,939

The company reports its inventory using the LIFO costing method during 2007 and 2008.

Required:
a. At what dollar amount are inventories reported on its 2008 balance sheet?
b. At what dollar amount would inventories have been reported in 2008 if FIFO inventory costing had been used?

General Motors Corporation

a) Inventories are reported on its 2008 balance sheet at $13,042.

b) Inventories would have been reported on its 2008 balance sheet at $14,275 if FIFO inventory costing had been used.

Explanation:

a) Data and Analysis:

Inventories at December 31 ($ millions)                                   2008     2007

Productive material, work in process, and supplies              $4,849 $6,267

Finished product, service parts, etc.                                        9,426  10,095

Total inventories at FIFO                                                         14,275  16,362

Less LIFO allowance                                                                (1,233)   (1,423)

Total automotive and other inventories, less allowances $13,042 $14,939

b) LIFO = Last-in, First-out.  This inventory method assumes that items that were brought into the store last were the first to be sold.  This presupposes that the cost of goods sold will be determined by the most recent items, while the ending inventory will be determined by the latter items.

c) FIFO = First-in, First-out:  This is the opposite of LIFO.  The inventory method assumes that items that were bought first would be the first to be sold.  This method presupposes that the cost of goods sold will be determined by the first items in store, while the ending inventory will be determined by the cost of the most items.