Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $184,500; ending inventory per physical count at December 31, current year, 1,800 units; sales, 8,200 units; sales price per unit, $75; and average income tax rate, 20 percent.

Required:

1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods.

1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods.

2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?

3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling? PART 1A:

Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations.

Cost of Goods Sold	Inventory Costing Method
	Units	FIFO	LIFO	Average Cost
Beginning inventory
Purchases
Goods available for sale
Ending inventory
Cost of goods sold

PART 1B:

Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations. Use the COGS amount from Required 1a.

Income Statement	FIFO	LIFO	Average Cost
Sales Revenue
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense
Net income

PART 2:

Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?

net income
income taxes paid.

PART 3:

Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?

net income
income taxes paid (cash flow).