A company currently uses LIFO inventory valuation

Ans:B.
Under U.S.GAAP, a LIFO reserve increase indicates that the prices were increasing and the difference in inventory cost using LIFO and FIFO valuation methods increased over the period.During periods of rising prices, LIFO records a higher COGS than FIFO because the LIFO method uses the newer, more expensive inventory for COGS.If COGS are higher, net income will be lower.If the company used FIFO rather than LIFO, the effects will be reversed.Thus, COGS will be lower and the net income will be higher.