Reference no: EM131287747
In 2016, Gail changed from the lower of cost or market FIFO method to the LIFO inventory method The ending inventory for 2015 was computed as follows:
Item FIFO Cost Replacement Cost Lower of Cost or Market
A $26,000 $15,000 $15,000
B 52,000 55,000 52,000
C 30,000 7,000 7,000
$74,000
Item C was damaged goods, and the replacement cost used was actually the estimated selling price of the goods. The actual cost to replace item C was $32,000.
a. What is the correct beginning inventory for 2016 under the LIFO method?
b. What immediate tax consequences (if any) will result from the switch to LIFO?
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