Courtney Company uses a periodic inventory system. Data for 2011: beginning merchandise inventory (December 31, 2010), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $144,500; ending inventory per physical count at December 31, 2011, 1,800 units; sales 8,200 units; sales price per unit, $65; and average income tax rate, 30 percent.

Required:
1. Prepare income statements under the FIFO, LIFO, and weighted average costing methods. Use a format similar to the following:

2. Between FIFO and LIFO, which method is preferable in terms of?
(a) Net income
(b) Income taxes paid (cash flow)? Explain.
3. What would your answer to requirement 2 be, assuming that prices were falling?Explain.

INVENTORY COSTING METHOD Units FIFO Income Statement Sales revenue Cost of goods sold LIFO Weighted Average Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross proft Expenses Pretax income Income tax expense Net income