Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,150 units at $37; purchases, 7,870 units at $39; expenses (excluding income taxes), $194,400; ending inventory per physical count at December 31, current year, 1,690 units; sales, 8,330 units; sales price per unit, $78; and average income tax rate, 32 percent.

Required:

1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?

Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations. Round your final answers to the nearest whole dollar amount.

1A.

	Inventory Costing Method
Cost of Goods Sold	Units	FIFO	LIFO	Average Cost
Beginning inventory	2,150	$79,550	$79,550	$79,550
Purchases	7,870	306,930	306,930	306,930
Goods available for sale	10,020	386,480	386,480	386,480
Ending inventory
Cost of goods sold

1B.

Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations. Round your final answers to the nearest whole dollar amount. Use the COGS amount from Required 1a.

Income Statement	FIFO	LIFO	Average Cost
Sales Revenue
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense
Net income

2.

Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?

Net income
Income taxes paid

3.

Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?

Net income
Income taxes paid (cash flow)