Ferro Ltd. began operations on January 1, 2018. Merchandise purchases and four alternative methods of valuing inventory for the first two years of operations are summarized below:

Required:
a. Which of the four methods listed above does not apply matching? Briefly explain.
b. Determine the cost flow assumption or inventory valuation method that would report the highest net income for 2018.
c. Assuming that FIFO had been used for both years, how much would be the cost of goods sold for 2019?

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2019 2018 Purchases $600,000 $700,000 Ending inventory Specific identification First-in, first-out (FIFO) 212,000 192,000 188,000 220,000 Average-cost Lower of cost and market 216,000 190,000 176,000 196,000