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 7,900 $ 11
For the current year:
Purchase, March 5 19,900 9
Purchase, September 19 10,900 5
Sale ($27 each) 8,900
Sale ($29 each) 16,900
Operating expenses (excluding income tax expense) $ 409,000
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.
2. Compute the difference between the pretax income and the ending inventory amounts for the two cases.
Comparison Amounts
Case A Case B
FIFO LIFO Difference
Pretax Income
Ending Inventory
3. Which inventory costing method may be preferred for income tax purposes?