Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,130 units at $37; purchases, 7,990 units at $39; expenses (excluding income taxes), $194,400; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,510 units; sales price per unit, $79; and average income tax rate, 34 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?

Inventory Costing Method \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{1}{c|}{ Cost of Goods Sold } & Units & FIFO & LIFO & Average Cost \\ \hline Beginning inventory & & & & \\ \hline Purchases & & 0 & & \\ \hline Goods available for sale & & & & \\ \hline Ending inventory & & & & \\ \hline Cost of goods sold & & & & \\ \hline \end{tabular} \begin{tabular}{lll} \multicolumn{1}{c|}{ Income Statement } & FIFO \\ \hline Sales Revenue & & \\ \hline Cost of goods sold & & \\ \hline Gross profit & & \\ \hline Operating expenses & & \\ \hline Pretax income & & \\ \hline Net income tax expense & & \\ \hline \end{tabular} Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 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