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 : 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. 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes? \begin{tabular}{|l|c|c|c|} \hline \multicolumn{1}{|c|}{} & \multicolumn{2}{c|}{ Comparison of Amounts } \\ \cline { 2 - 4 } & Case A & Case B & \multirow{2}{*}{ Difference } \\ \cline { 2 - 3 } & FIFO & LIFO & \\ \hline Pretax income & & \\ \hline Ending inventory & & \\ \hline \end{tabular} Which inventory costing method may be preferred for income tax purposes? Which inventory costing method may be preferred for income tax purposes