E7-7 (Algo) Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3

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		2,920	$ 11
For the current year:
Purchase, April 11		8,890	12
Purchase, June 1		7,900	17
Sales ($56 each)		10,970
Operating expenses (excluding income tax expense)	$ 188,500

Required:

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

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

Which inventory costing method may be preferred for income tax purposes?