Final answer:
The Mock Corporation, when converting to S Corporation status, must add a LIFO recapture amount to its tax liability, which equals the difference between FIFO and LIFO inventory values. Without additional tax rate information, the recapture amount of $115,000 stands as the correct answer for the additional tax to be added.
Step-by-step explanation:
The question pertains to the tax implications of a Mock Corporation converting from a C corporation to an S Corporation status in 2023, specifically focusing on the inventory method transition from LIFO to FIFO.
Upon this conversion, the corporation must recognize the increase in inventory value, in this case, the difference between the FIFO value and the LIFO value, as income. This increase is known as the LIFO recapture amount which will be subject to tax.
The important values are: LIFO Inventory = $435,000 and FIFO Inventory = $550,000. Thus, LIFO recapture amount = FIFO Inventory value - LIFO Inventory value = $550,000 - $435,000 = $115,000.
Since this question deals with tax law as it relates to corporations, specific tax rates or further information may be needed to calculate the exact tax liability. Therefore, without additional data on the corporate tax rate or instructions to use a specific rate, we can only infer that the tax must be added to the Mock Corporation's tax liability based on the LIFO recapture amount. However, it does not specify the exact amount of 'tax' so, the correct answer reflecting just the recapture value would be $115,000. Therefore, the correct option to choose in the final part clearly is C. $115,000.