Question

Heinz Company began operations on January 1, 2017, and uses the FIFO method in costing its raw material inventory. 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: Final Inventory 2017 2018 FIFO $640,000 $ 712,000 LIFO 560,000 636,000 Net Income (computed under the FIFO method) 980,000 1,330,000 Based on the above information, a change to the LIFO method in 2018 would result in net income for 2018 of Group of answer choices

a. $1,370,000.
b. $1,250,000.
c. $1,254,000.
d. $1,330,00

Answer 1

c. $1,254,000.

Step-by-step explanation:

The computation of the net income under the LIFO method is shown below:

= Net income of the current year - final inventory under FIFO method for current year + final inventory under LIFO method for the current year

= $1,330,000 - $712,000 + $636,000

= $1,254,000

The change in the inventory method would impact the current year's net income and according to that, the calculations are shown above.