The following information is available for Leno Company:
Sales ...............$695,000
Goods available for sale ........$535,000
Ending inventory (using FIFO) ......$246,000
Leno Company currently uses the FIFO cost flow method for financial statement reporting and for tax reporting. It is considering changing to the LIFO cost flow method for tax reporting purposes. If Leno uses LIFO, its ending inventory would be $175,000.
Required:
a. Why would Leno want to change to LIFO for tax reporting?
b. Discuss any changes that Leno would have to make for GAAP reporting if it does change to LIFO for tax reporting.