E$7-7($Algo$)$ Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO$7-2,7-3$E$7-7($Algo$)$ Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO$7-2,7-3$

Emily Company uses a periodic inventory system. At the end of the annual accounting period, December $31$ of the current year, the

accounting records provided the following information for product $2$ :

Required:

Prepare a separate income statement through pretax income that details cost of goods sold for $($a$)$ Case A: FIFO and $($b$)$ Case B:

LIFO.

Compute the difference between the pretax income and the ending inventory amount for the two cases.

Which inventory costing method may be preferred for income tax purposes?

Complete this question by entering your answers in the tabs below.

Emily Company uses a periodic inventory system. At the end of the annual accounting period, December $31$ of the current year, the accounting records provided the following information for product $2$:

Units Unit Cost

Inventory, December $31,$ prior year $2,930$ $ $11$

For the current year:

Purchase, April $118,86012$

Purchase, June $17,82017$

Sales $($$$53$ each$)10,940$

Operating expenses $($excluding income tax expense$)$ $ $194,500$

Required:

Prepare a separate income statement through pretax income that details cost of goods sold for $($a$)$ Case A: FIFO and $($b$)$ Case B: LIFO.

Compute the difference between the pretax income and the ending inventory amount for the two cases.

Which inventory costing method may be preferred for income tax purposes?