Item$3$

$3$

points

Time Remaining $2$ hours $41$ minutes $21$ seconds$02$:$41$:$21$

eBookHintPrintReferencesCheck my workCheck My Work button is now enabledItem $3$

Time Remaining $2$ hours $41$ minutes $21$ seconds$02$:$41$:$21$

The following information pertains to the inventory of Parvin Company:

January $1$ Beginning inventory $400$ units @ $$20$

April $1$ Purchased $2,600$ units @ $$25$

October $1$ Purchased $1,200$ units @ $$26$

During the year, Parvin sold $3,570$ units of inventory at $$42$ per unit and incurred $$19,000$ 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 $$144,500,$ inventory of $$8,000,$ common stock of $$129,000,$ and retained earnings of $$23,500.$

Required

Prepare income statements using FIFO and LIFO.

Determine the amount of income tax that Parvin would pay using each cost flow method.

Determine the cash flow from operating activities under FIFO and LIFO.