3. [FIFO and LIFO--basic relationships] The Mogul Com- pany, expecting that decreases in oil prices are only temporary. increases its monthly purchases as the price of oil decreases Mogul's monthly oil purchases follow Penod Quantity (bbl) Price/Barrel First quarter January 100,000 $25 February [00,000 25 March 100.000 25 Second quarter April 125,000 May 125,000 June 125,000 888 20 20 20 Third quarter July 150,000 18 August 150,000 18 September 150,000 18 Fourth quarter October 200,000 15 November 200,000 15 December 200.000 15 Assumptions The company has no opening inventory. Sales are 100,000 barrels per month for the period January through June and 150.000 per month for the period July through December. ' Mogul uses the LIFO inventory method. The company's tax rate is 40%.

a. Compute the difference in each of the following dollar amounts that Mogul would report under its present accounting method (LIFO), as compared with use of the FIFO method. (Note: The solution does not require long calculations; focus on the differ- ences between FIFO and LIFO levels, not the actual amounts.) (i) Inventory purchases (ii) Closing inventory (iii) COGS (fv) Pretax income (v) Income tax expense (vi) Net income (vii) Cash flow from operations (vill) Working capital (year-end)