Consider the following data for the year 20X8:

1. Prepare a comparative table computing the cost of goods sold using columns for FIFO and LIFO. In a final column, show (a) the difference between FIFO and LIFO inventories (the LIFO reserve) at the beginning of the year and at the end of the year, and (b) how the change in this amount explains the difference in cost of goods sold.
2. Repeat requirement 1, except assume that the ending inventory consisted of zero units.
3. In your own words, explain why, for a given year, the increase in the LIFO reserve measures the amount by which cost of goods sold is higher under LIFO thanFIFO.

Units Uit Cost Beginning inventory Purchases 2 24 28 3 Ending inventory 2 FIFO, $20; LIFO, $12. To be computed.