Question
BettyCompanybeganoperationsin2016andusestheaveragecostmethodincostingits inventory.In2017,Bettyis investigatingachangetotheLIFOmethod.Beforemakingthatdetermination,Bettydesirestodeterminewhat effectsuchachangewillhaveonnetincome.Bettyhascompiledthefollowinginformation: 2016 2017 EndingInventoryusing: Averagecost $180,000 $200,000 LIFO $180,000 110,000 Netincome (computedusingtheaverage costmethod) 120,000 170,000 Assumea40%taxrate. IfBettyadoptedLIFOin2017,netincomewouldbe: a.$80,000. b.$116,000. c.$170,000. d.$224,000.
- BettyCompanybeganoperationsin2016andusestheaveragecostmethodincostingits
inventory.In2017,Bettyis investigatingachangetotheLIFOmethod.Beforemakingthatdetermination,Bettydesirestodeterminewhat effectsuchachangewillhaveonnetincome.Bettyhascompiledthefollowinginformation:
2016 2017
EndingInventoryusing:
Averagecost $180,000 $200,000 LIFO $180,000 110,000
Netincome
(computedusingtheaverage costmethod) 120,000 170,000
Assumea40%taxrate.
IfBettyadoptedLIFOin2017,netincomewouldbe:
a.$80,000.
b.$116,000.
c.$170,000.
d.$224,000.
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