Lunar company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2010, the accounting records provided the following information for product 2:

Required:
1. Prepare a separate income statement through pretax income that details cost of goods sold for
a. Case A: FIFO.
b. Case B: LIFO.
For each case, show the computation of the ending inventory. (Hint: Set up adjacent columns for each case.)
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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Units Unit Cost $12 Inventory, December 3 , 2009 For the year 2010: 3,000 Purchase, April 11 Purchase, June l 9.000 8,000 11,000 10 15 Sales ($50 each) Operating expenses (excluding income tax expense), $185.000