E$7-11($Algo$)$ Evaluating the Choice among Three Alternative Inventory Methods Based on Income and Cash Flow Effects LO$7-2,7-3$

Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory $($ending inventory December $31,$ prior year$),2,120$ units at $$35$; purchases, $7,820$ units at $$37$; expenses $($excluding income taxes$),$ $$194,500$; ending inventory per physical count at December $31,$ current year, $1,640$ units; sales, $8,300$ units; sales price per unit, $$75$; and average income tax rate, $32$ 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?