E$7-7($Algo$)$ Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO$7-2,7-3$Complete this question by entering your answers in the tabs below.

$3\mathrm{.}33$

points

Required $1$

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

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?