The management of Gresa Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2022 if either the FIFO or the LIFO method had been used. For 2022, the accounting records show these data:

Operating expenses were $130,000, and the company's income tax rate is 20%.

Instructions
a. Prepare comparative condensed income statements for 2022 under FIFO and LIFO. (Show computations of ending inventory.)
b. Answer the following questions for management.
1. Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? Why?
2. Which cost flow method (FIFO or LIFO) produces the more meaningful net income? Why?

3. Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of goods? Why?
4. How much more cash will be available for management under LIFO than under FIFO? Why?
5. Will gross profit under the average-cost method be higher or lower than FIFO? Than LIFO.

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Inventories Beginning (7,000 units) Ending (17,000 units) Purchases were made quarterly as follows. Quarter Units 50,000 40,000 40,000 60,000 190,000 1234 $14,000 2 Purchases and Sales Total net sales (180,000 units) Total cost of goods purchased (190,000 units) Unit Cost $2.20 2.35 2.50 2.70 Total Cost $110,000 94,000 100,000 162,000 $466,000 $747,000 466,000