Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO – Beck Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31, 2012, the accounting records provided the following information for product 2:
| Units Don't use plagiarized sources. Get Your Custom Essay on which inventory costing method may be preferred for income tax purposes explain 555620 For $10/Page 0nly | Unit Cost | |
| Inventory, December 31, 2011 | 7,000 | $5 |
| For the year 2012: | ||
| Purchase, March 5 | 19,000 | 9 |
| Purchase, September 19 | 10,000 | 11 |
| Sale ($28 each) | 8,000 | |
| Sale ($30 each) | 16,000 | |
| Operating expenses (excluding income tax expense) | $500,000 |
Required:
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. For each case, show the computation of the ending inventory.
2. Compare the pretax income and the ending inventory amounts between the two cases. Explain the similarities and differences.
3. Which inventory costing method may be preferred for income tax purposes? Explain.
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