FORM 10-K

52 Note 4. Inventories Inventories are composed of the following: (In millions) December 30, 2017 December 31, 2016 Finished goods $ 1,790 $ 1,947 Work in process 2,238 2,742 Raw materials and components 804 724 4,832 5,413 Progress/milestone payments (682) (949) Total $ 4,150 $ 4,464 Inventories valued by the LIFO method totaled $2.2 billion and $1.9 billion at December 30, 2017 and December 31, 2016, respectively, and the carrying values of these inventories would have been higher by approximately $452 million and $457 million, respectively, had our LIFO inventories been valued at current costs. Inventories related to long-term contracts, net of progress/milestone payments, were $387 million and $557 million at December 30, 2017 and December 31, 2016, respectively. Note 5. Property, Plant and Equipment, Net Our Manufacturing group’s property, plant and equipment, net is composed of the following: (Dollars in millions) Useful Lives (in years) December 30, 2017 December 31, 2016 Land and buildings 3 – 40 $ 1,948 $ 1,884 Machinery and equipment 1 – 20 4,893 4,820 6,841 6,704 Accumulated depreciation and amortization (4,120) (4,123) Total $ 2,721 $ 2,581 At December 30, 2017 and December 31, 2016, assets under capital leases totaled $290 million and $284 million, respectively, and had accumulated amortization of $94 million and $85 million, respectively. The Manufacturing group’s depreciation expense, which included amortization expense on capital leases, totaled $362 million, $368 million and $383 million in 2017, 2016 and 2015, respectively. Note 6. Accrued Liabilities The accrued liabilities of our Manufacturing group are summarized below: (In millions) December 30, 2017 December 31, 2016 Customer deposits $ 1,007 $ 991 Salaries, wages and employer taxes 329 301 Current portion of warranty and product maintenance contracts 190 151 Other 915 814 Total $ 2,441 $ 2,257 Changes in our warranty liability are as follows: (In millions) 2017 2016 2015 Balance at beginning of year $ 138 $ 143 $ 148 Provision 81 79 78 Settlements (69) (70) (72) Acquisitions 35 2 3 Adjustments* (21) (16) (14) Balance at end of year $ 164 $ 138 $ 143 * Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.