Givoly Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2:
| Units | Unit Cost | ||||||||
| Inventory, December 31, prior year | 6,000 | $ | 10 | ||||||
| For the current year: | |||||||||
| Purchase, March 5 | 18,000 | 8 | |||||||
| Purchase, September 19 | 9,000 | 4 | |||||||
| Sale ($25 each) | 8,800 | ||||||||
| Sale ($33 each) | 15,000 | ||||||||
| Operating expenses (excluding income tax expense) | $ | 390,000 | |||||||
1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. (Loss amounts should be indicated with a minus sign.)
1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. (Loss amounts should be indicated with a minus sign.) Sales revenue, beginning inventory, purchases, goods avaiable for sale, ending inventory, cost of goods sold, gross profit, operating expenses, pretax income/loss **show work,
2) Compute the difference between the pretax income and the ending inventory amounts for the two cases.
3) Which inventory costing method may be preferred for income tax purposes?
