E7-8 (Static) Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3 Givoly Incorporated 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 : 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. 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes? Complete this question by entering your answers in the tabs below. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Note: Loss amounts should be indicated with a minus sign. \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{5}{|c|}{ GIVOLY INCORPORATED } \\ \hline \multicolumn{5}{|c|}{ Income Statement } \\ \hline \multicolumn{5}{|c|}{ For the Year Ended December 31, current year } \\ \hline & \multicolumn{2}{|c|}{ Case A } & \multicolumn{2}{|c|}{ Case B } \\ \hline & \multicolumn{2}{|c|}{ FIFO } & \multicolumn{2}{|c|}{ LIFO } \\ \hline Sales revenue & & $704,000 & & $704,000 \\ \hline \multicolumn{5}{|l|}{ Cost of goods sold: } \\ \hline Beginning inventory & $77,000 & & $77,000 & \\ \hline \multirow[t]{2}{*}{ Purchases } & 221,000 & & 221,000 & \\ \hline & 0 & & 0 & \\ \hline Goods available for sale & 298,000 & & 298,000 & \\ \hline \multicolumn{5}{|l|}{ Ending inventory } \\ \hline & 0 & & 0 & \\ \hline \multicolumn{5}{|l|}{ Cost of goods sold } \\ \hline \multicolumn{5}{|l|}{ Gross profit } \\ \hline \multirow[t]{2}{*}{ Operating expenses } & & 400,000 & & 400,000 \\ \hline & & 0 & & 0 \\ \hline Pretax income/loss & & & & \\ \hline \end{tabular} Required 1 Required 2