Change in Inventory Cost Flow Assumption

Berg Company began operations on January $1,$ Year $1,$ and uses the FIFO method in costing its raw materials inventory. During Year $2,$ management is contemplating a

change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been

developed:

Required:

What is the effect on income before income taxes in Year $2$ of a change to the LIFO method?

A change to the LIFO method is one of the exceptions to the retrospective application of a change in accounting principle $.$ Because of the

impracticality $$ of determining the prior inventory amount under LIFO, the company $$ apply the change prospectively. Therefore, the FIFO

beginning inventory $$ for Year $2$ is used for LIFO. Since the LIFO ending inventory is $$,x$ less than $$ the FIFO ending inventory, LIFO

income before income taxes is $

$$ FIFO income. Therefore, income before income taxes under LIFO is $

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