Change in Inventory Cost Flow Assumption – The Berg Company began operations on January 1, 2007 and uses the FIFO method in costing its raw material inventory. During 2008 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:
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2008 |
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FIFO—Ending inventory |
$240,000 |
$270,000 |
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LIFO—Ending inventory |
200,000 |
210,000 |
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Income before income taxes (computed under the FIFO method) |
120,000 |
170,000 |
Required
What is the effect on income before income taxes in 2008 of a change to the LIFO method?
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