E7-7 2,7-3 Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO Emily 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 Unit Cost Inventory, December 31, prior year 3,000 $ 9 For the current year: Purchase, April 11 9,000 10 Purchase, June 1 7,000 Sales ($50 each) 10,000 Operating expenses (excluding income tax expense) $190,000 Required: 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. For each case, show the computation of the ending inventory and cost of goods sold. (Hint: Set up adjacent columns for each case.) 2. Compare the pretax income and the ending inventory amounts between the two cases. Explam te similarities and differences. 3. Which inventory costing method may be preferred for income tax purposes? Explain. Analyzing and Internrating the E7-8