1. Eleanor's Computers is a retailer of computer products. The company reports the following financial information for the year ending December 31, 2019.

   2018 2018

   Cash $ 125,000 Accounts payable $ 150,000

   Accounts receivable 275,000 Notes payable 225,000

   Inventory 325,000 Accrued liabilities 100,000

   Total current assets $ 725,000 Total current liabilities $ 475,000

   Fixed assets, net 420,000 Long-term debt 400,000

   Total assets $1,145,000 Common stock 200,000

   Retained earnings 70,000

   Total liabilities & equity $1,145,000

   2018

   Sales $ 1,500,000

   Cost of goods sold 1,200,000

   Gross profit $ 300,000

   Operating expenses 100,000

   Operating profit $ 200,000

   Interest expense 72,000

   Pretax income $ 128,000

   Tax @ 40% 51,200

   Net income $ 76,800

   The notes to the financial statements include the following statement. Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At December 31, 2018 and 2017, inventories would have been greater by $25,000 and $22,500, respectively, if they had been valued on a lower of first-in, first-out (FIFO) cost.

   How would the company's 2018 net income change if the company had used FIFO rather than LIFO? Assume that the carrying amount of inventory as of December 31, 2017 was $315,000, and the company's tax rate of 40% does not change.

   	a.	The net income would be higher by $2,500 with FIFO.
   	b.	The net income would not change with FIFO.
   	c.	The net income would be higher by $1,000 with FIFO.
   	d.	The net income would be higher by $2,000 with FIFO.
   	e.	The net income would be higher by $1,500 with FIFO.

How would the company's 2018 inventory turnover ratio change if the company had used FIFO rather than LIFO? Assume that the carrying amount of inventory as of December 31, 2017 was $315,000, and the company's tax rate of 40% does not change.

	a.	Inventory turnover with LIFO = 4.69; inventory with FIFO = 4.36.
	b.	Inventory turnover with LIFO = 3.69; inventory turnover with FIFO = 3.43.
	c.	Inventory turnover with LIFO = 3.81; inventory turnover with FIFO = 3.56
	d.	Inventory turnover with LIFO = 3.75; inventory turnover with FIFO = 3.48.