Minnows Corporation began operations in 2014. At the beginning of the year, the company purchased plant assets of $1,800,000, with an estimated useful life of 10 years and no residual value. During the year, the company had net sales of $2,600,000, salaries expense of $400,000, and other expenses of $160,000, excluding depreciation. In addition, Minnows purchased inventory as follows.

At the end of the year, a physical inventory disclosed 1,000 units still on hand. Minnows€™s managers know they have a choice of accounting methods, but they are unsure how those methods will affect net income. They have heard of the FIFO and LIFO inventory methods and the straight-line and double-declining-balance depreciation methods.

Required
1. Prepare two income statements for Minnows, one using the FIFO and straight-line methods and the other using the LIFO and double-declining-balance methods. Ignore income taxes.
2. Prepare a schedule accounting for the difference in the two net income figures obtained in requirement 1.
3. What effect does the choice of accounting method have on Minnows€™s inventory turnover? What conclusions can you draw? Use the year-end balance to compute the ratio. (Round to one decimal place.)
4. How does the choice of accounting methods affect Minnows€™s return on assets? Assume the company€™s only assets are cash of $160,000, inventory, and plant assets. Use year-end balances to compute the ratios. Is your evaluation of Minnows€™s profitability affected by the choice of accounting methods? (Round to one decimalplace.)

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Jan. 15 Mar. 20 June 15 Sept. 18 Dec. 9 Total 400 units at $408 1,600 units at $416 1,200 units at $412 600 units at $420 800 units at $400 320,000 163,200 665,600 494 400 252,000 1,895,200 4,600 units