You are provided with the following information. They use a periodic method of accounting for its inventory transactions.

March 1 beginning inventory 1,500 liters at the cost of .40

March 3 purchased 2,000 liters liters at the cost of .45

March 5 sold at 1,800 liters litres at the cost of .60

March 10 purchased 3,500 litres litres at the cost of .49

March 20 purchased 2,000 litres at the cost of .55

March 30 sold 4,500 litres litres at the cost of .70

1. Prepare a partial income statement through gross profit, and calculate the value of ending inventory that would be reported on the balance sheet, under each of the following cost of Assumptions:

Specific identification method assuming:

The March 5 sale consisted of 900 liters from march 1 beginning inventory and 900 litres from march 3 purchase; and

The March 30 sale consisted of the following number of units sold from beginning inventory and each purchase: 400 liters from March 1; 500 liters from March 3; 2,600 liters from March 10; 1,000 liters from March 20

2. How can companies use a cost of flow method to justify price increase? Which cost flow method would best support an argument to increase prices?