The purchase schedule for Lumbermans and Associates is as follows:

The inventory balance as of the beginning of the year was $15,000 (15,000 units @ $1), and an inventory count at year-end indicated that 11,000 items were on hand. Sales and expenses (excluding cost of goods sold) totaled $55, 000 and $15,000, respectively. The federal income tax is 30 percent of taxable incomeREQUIRED:a. Prepare three income statements, one under each of the assumptions: FIFO, average, and LIFO.b. How many tax dollars would be saved by using LIFO instead of FIFO?c. Assume that the market value of an inventory item dropped to $1.35 as of year-end. Apply the lower-of-cost-or-market rule, and provide the appropriate journal entry (if necessary) under the FIFO, averaging, and LIFO assumptions.d. Repeat (a) above assuming that the costs per item were as follows:Beginning inventory....$1.60March 15...........1.40July 30............1.30December 17........1.20Which of the three assumptions gives rise to the highest net income and ending inventory amounts now?Why?

Items Purchased 6,000 9,000 Cost per Item S1.30 1.50 Date March 15 July 30 December 17 Total 7,000 22,000 1.60