JD Electronics sells sound systems and other consumer electronics through a chain of retail outlets. Joanna Danielle, president of the company, recently read that many companies adopting the LIFO method of inventory valuation to reduce income taxes and eliminate gains from current period income. She wonders whether switching to LIFO from the company's current periodic FIFO inventory method would be beneficial. The following data concerning a popular model of entertainment center were taken from the company's inventory records:

Required:
1. Determine cost of goods sold for the entertainment centers under

(a) periodic FIFO and

(b) periodic LIFO. Ignore lower of cost or market considerations.
2. Assume that operating expenses of $15,000,000 are related to this product and that the company has a 35% income tax rate. Calculate net income under both inventory valuation methods.
3. Assume that the price trend on the entertainment centers is generally mirrored by the other items in JD Electronics inventory. Would the company be well advised to switch to the periodic LIFO method to value its inventory?

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Inventory Purchases Units Cost per Unit Beginning inventory 3,100 $1,875 Total $ 5,812,500 March 1, 2008 4,000 1,825 7.300,000 June 15, 2008 3,500 1.800 6,300,000 August 1, 2008 3.800 1.785 6,783,000 October 1, 2008 4.500 1,760 7.920,000 December 15, 2008 3,000 1,750 21.900 5,250,000 539,365,500 2008 Sales Units Price per Unit Total First quarter 4,100 $3.400 $13.940,000 Second quarter 4,600 3,300 15,180,000 Third quarter 3,500 3,250 11.375,000 Fourth quarter 5,500 3.200 17,600,000 17.700 $58,095.000