Betty Company Began Operations in 2016 and Uses the Average

Multiple Choice

Betty Company began operations in 2016 and uses the average cost method in costing its inventory. In 2017, Betty is investigating a change to the LIFO method. Before making that determination, Betty desires to determine what effect such a change will have on net income. Betty has compiled the following information: $\begin{array}{lrr}&2016&2017\\\hline\text { Ending Inventory using: } \\\text { Average cost } & \$ 180,000 & \$ 200,000 \\\text { LIFO } & \$ 180,000 & 110,000 \\\text { Net income (computed using the average- } & & \\\text { cost method) } & 120,000 & 170,000\end{array}$ Assume a 40% tax rate.
If Betty adopted LIFO in 2017, net income would be

A) $80,000.
B) $116,000.
C) $170,000.
D) $224,000.