Question

CONSOLIDATED BALANCE SHEET (millions of dollars)	2016	2015
Assets	2016	2015
Current assets	2016	2015
Cash and cash equivalents	3,657	3,705
Notes and accounts receivable	21,394	19,875
Inventories: Crude oil, products and merchandise	10,877	12,037
Materials and supplies	4,203	4,208
Other current assets	1,285	2,798
Total current assets	41,416	42,623

Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method – LIFO). Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred in bringing the inventory to its existing condition and location.

In 2016, 2015 and 2014, net income included losses of $295 million and $186 million, and a gain of $187 million, respectively, attributable to the combined effects of LIFO inventory accumulations and drawdowns. The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $8.1 billion and $4.5 billion at December 31, 2016, and 2015, respectively.

Crude oil, products and merchandise as of year-end 2016 and 2015 consist of the following:

Crude oil, products and merchandise as of year-end 2016 and 2015 consist of the following (billions of dollars):	2016	2015
Crude oil	3.9	4.2
Petroleum products	3.7	4.1
Chemical products	2.8	2.7
Gas	0.5	1.0
Total	10.9	12.0

(millions of dollars)	2016	2015	2014
Total revenues	226,094	268,882	411,939
Cost of Goods Sold	136,098	165,590	266,831
Net income	7,840	16,150	32,520

5.3 If ExxonMobil had used FIFO in 2016, what would be the value of the inventory?

		$10,877
		$18,977
		$8,100
		$2,777

Answer 1

Correct answer is B $18,977 million

Analysis

Value of Inventories in 2016 : (Crude oil, products and merchandise) = $10,877 million

The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $8.1 billion or $8100 million

Under FIFO the closing inventory would be greater than the reported inventory under LIFO. Under the LIFO method, the inventory received last is dispatched first. Therefore, under increasing prices, the LIFO closing inventory would be lower compared to FIFO . Aggregate replacement cost of inventories is approximately amount Exxon Mobil would have reported in the inventories on a FIFO basis. FIFO assumes the last-in is still here on the balance sheet. Thus Under FIFO the closing inventory would be greater

If ExxonMobil had used FIFO in 2016, the value of the inventory would be $10,877 million+ $8100 million =  $18,977 million