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?

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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