In 2015, Gail changed from the lower of cost or market FIFO method to the LIFO inventory method. The ending inventory for 2014 was computed as follows:

Item C was damaged goods, and the replacement cost used was actually the estimated selling price of the goods. The actual cost to replace item C was $32,000.

a. What is the correct beginning inventory for 2015 under the LIFO method?

b. What immediate tax consequences (if any) will result from the switch to LIFO?

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Item A B C FIFO Cost $26,000 52,000 30,000 Replacement Cost $15,000 55,000 7,000 Lower of Cost or Market $15,000 52,000 7,000 $74,000