1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.

2. Compute the difference between the pretax income and the ending inventory amount for the two cases.

3. Which inventory costing method may be preferred for income tax purposes? LIFO vs. FIFO

Please explain how you got each answer

[The following information applies to the questions displayed below.] Broadhead Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Units 3,000 Unit Cost $ 9 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($50 each) Operating expenses (excluding income tax expense) 9,000 7,000 10,000 10 15 $195,000