Exercise $5-6$A $($Static$)$ Income tax effect of shifting from FIFO to LIFO LO $5-1$

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The following information pertains to the inventory of Parvin Company during Year $2.$

January $1$ Beginning Inventory $400$ units @ $$30$

April $1$ Purchased $2,000$ units @ $$35$

October $1$ Purchased $600$ units @ $$38$

During Year $2,$ Parvin sold $2,700$ units of inventory at $$90$ per unit and incurred $$41,500$ of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a $30$ percent income tax rate. Parvin started the period with cash of $$75,000,$ inventory of $$12,000,$ common stock of $$50,000,$ and retained earnings of $$37,000.$

Exercise $5-6$A $($Static$)$ Part b

b$.$ Prepare income statements using FIFO and LIFO. c$.$ Determine the amount of income tax that Parvin would pay using each cost flow method. d$.$ Determine the cash flow from operating activities under FIFO and LIFO. $($Amounts to be deducted should be indicated with minus sign.$)$