E$7-8($Algo$)$ Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO$7-2,7-3$

Givoly Incorporated 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 $6,800$ $ $8$

For the current year:

Purchase, March $518,8006$

Purchase, September $199,8002$

Sale $($$$30$ each$)8,000$

Sale $($$$32$ each$)15,800$

Operating expenses $($excluding income tax expense$)$ $ $398,000$

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 amounts for the two cases.

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