Jeans R’Us, Inc., reported the following data in its annual financial statements

(dollars in thousands):

2000 2001 Cost of goods sold—LIFO 31,678 44,690 Cost of goods sold—FIFO 31,089 41,656 Ending inventory—LIFO 12,298 13,365 Ending inventory—FIFO 14,888 18,989 Net income—LIFO 30,500 37,775 Net income—FIFO 37,895 40,876 Required

a. Discuss the differences in inventory values and net income under both LIFO and FIFO.

b. Discuss why a firm might prefer LIFO under these circumstances.