Effect of LIFO on financial statements over several periods. Howell Corporation commenced operations on January 2, Year 7. Its purchases and sales for the first four years of operations appear below:

Howell Corporation uses a LIFO cost flow assumption. Ignore income taxes.

a. Compute the ending inventory for each of the four years.

b. Compute income for each of the four years.

c. Compute the ratio of income divided by sales for each of the four years.

d. Interpret the pattern of income-to-sales percentages computed in part \(\mathbf{c}\).

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Purchases Units Unit Cost Units Sales Unit Price Year 7 36,000 $10.00 28,000 $12.00 Year 8 40,000 10.50 38,000 12.60 Year 9 45,000 11.30 48,000 13.23 Year 10 53,000 12.40 52,000 13.89