Beginning inventory, January 1, was 10,000 units at $5 each. Purchases during the year consisted of 15,000 at $6 on April 15, 20,000 units at $7 on July 19, and 25,000 units at $8 on November 2.

1. If the ending inventory on December 31 was 40,000, calculate the value of this inventory by using the three valuation methods.

   FIFO: LIFO: Average Cost:

2. Calculate the income statement items below for each of the inventory valuation methods.

   Net sales	30,000 units at $12 each
   Operating expenses	$100,000
   Income tax rate	30%

   Pan American Industries, Inc.
   	FIFO	LIFO	Average Cost
   Net sales
   Beginning inventory
   Purchases
   Cost of goods available for sale
   Ending inventory
   Cost of goods sold
   Gross profit
   Operating expenses
   Income before taxes
   Income tax
   Net income

3. Which inventory method should be used if the objective is to pay the least amount of taxes?

4. Which inventory method should be used if the objective is to show the greatest amount of profit in the annual report to the shareholders?