Given the following data, by how much would taxable income change if LIFO is used rather than FIFO?

Question

Quizplus · Accepted Answer

To calculate the difference in taxable income between LIFO and FIFO, we need to calculate the ending inventory value under both methods and subtract the LIFO value from the FIFO value.

Under FIFO, the ending inventory would be valued at $70,000 (200 units x $350). 
Under LIFO, the ending inventory would be valued at $51,000 (120 units x $425).

The difference between these two values is $19,000, which is the amount by which taxable income would decrease if LIFO is used instead of FIFO. Therefore, the correct answer is B) Decrease by $19,000.

Given the Following Data, by How Much Would Taxable Income