Question - In 2011, Gail changed from the lower of cost or market FIFO method to the LIFO inventory method. The ending inventory for 2010 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 2011 under the LIFO method?
b. What immediate tax consequences (if any) will result from the switch to LIFO?