Scoresby Inc. uses a perpetual inventory system. At December 31, 2012, the company's accounting records provided the following information for Product B:

Required:
1. Prepare an income statement for 2012 through pretax profit, showing the detailed computation of cost of sales for two cases:

a. Case A-FIFO

b. Case B-Weighted average For each case, show the computation of the ending inventory. (Hint: Set up adjacent columns, one for each case.)
2. Compare the two cases with regard to the pretax profit and the ending inventory amounts. Explain the similarities and differences.
3. Which inventory costing method may be preferred for income tax purposes? Explain.
4. Prepare journal entries to record transactions

(b) through (e), assuming that Scoresby uses FIFO for inventory costing.

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Transactions Units Unit Cost a. Inventory, December 31, 2011 7,000 S8 For the year 2012: b. Purchase, March 5 19,000 9 c. Sale, June 15 ($29 each) 10,000 d. Purchase, September 19 8,000 11 e. Sale, November 20 ($31 each) 16,000 f. Operating expenses (excluding income tax expense), $500,000