Client has provided the following information:

Inventory Schedule

Units Per Unit $$$ $$$$ Amount

Jan 1 10,000 $3.00 $30,000

Apr 1 10,000 $3.10 $31,000

Aug 1 10,000 $3.20 $32,000

Nov 1 10,000 $3.30 $33,000

Units sold --- 37,000 units sold at $10 per unit

Operating Expenses --- $75,000

Income Tax Rate --- 30%

There are no Other Revenues or Other Expenses

a. Prepare a multi-step income statement for Client, assuming that Client has adopted the FIFO method.

b. Prepare a multi-step income statement for Client, assuming that Client has adopted the LIFO method.

c. If the LIFO method is adopted, how many units would need to be purchased to avoid a LIFO liquidation and what amount would be saved in income taxes if the liquidation is avoided? For the purposes of this problem, assume that the cost to acquire a unit of inventory in December is $3.30 per unit and the optimal inventory level is 10,000 units.