E7-7 Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3 The following information applies to the questions displayed below. Broadhead 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 For the current year: 2,890 $10 Purchase, April 11 Purchase, June 1 Sales ($59 each) Operating expenses (excluding income tax expense) 8,980 7,890 10,900 13 $190,500 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 BROADHEAD COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Case B LIFO Sales revenue $643,100 $ 643,100 Cost of goods sold Beginning inventory Purchases Purchases 2,890 71,840 102,570 177,300 102,570 2,890 71,840 102,570 177,300 71,840 Goods available for sale Cost of goods sold 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. Comparison of Amounts Case B LIFO Case A FIFO Difference Pretax income Ending inventory