Scoresby 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:

Required:
1. Prepare a separate income statement through pretax income that details cost of goods sold for Cases A and B. For each case, show the computation of the ending inventory.
a. Case A: FIFO.
b. Case B: LIFO.
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 7,000 S 5 Inventory, December 31, 2011 For the year 2012: Purchase, March 5 Purchase, September 19 Sale ($27 each) Sale ($30 each) Operating expenses (excluding income tax expense). 19,000 0,000 8,000 $500,000