An annual report of Eastman Kodak Company contained the following note:
During this year and last year, inventory usage resulted in liquidations of LIFO inventory quantities. In the aggregate, these inventories were carried at the lower costs prevailing in prior years as compared with the costs of current purchases. The effect of these LIFO liquidations was to reduce cost of goods sold by $53 million in the current year and $31 million in the previous year.

Required:
1. Explain why the reduction in inventory quantity increased net income for Eastman Kodak.
2. If Eastman Kodak had used FIFO, would the reductions in inventory quantity during the two years have increased net income? Explain.