E7-8 (Algo) Analyzing and Interpreting the Financial Statement Effects of Periodic FIFO & LIFO

Orion Iron Corporation tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units	Unit Cost
a. Inventory, Beginning	400	$ 12
For the year:
b. Purchase, April 11	850	10
c. Purchase, June 1	750	14
d. Sale, May 1 (sold for $40 per unit)	400
e. Sale, July 3 (sold for $40 per unit)	670
f. Operating expenses (excluding income tax expense), $18,600

Required:

1. 1. Calculate the number and cost of goods available for sale.
2. 2. Calculate the number of units in ending inventory.
3. 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO and (b) LIFO
4. 4. Prepare an income statement that shows under the FIFO method and LIFO method
5. 5. Which inventory costing method minimizes income taxes?