Ernst Company sells electronics products. The company uses the perpetual inventory system. The following information relates to one of their electronics products for July 2020. Units Beginning inventory Jul 1 20 units @ $2,000/ unit Purchases Jul 8 10 units @$1,800/unit Jul 20 20 units @$1,700/unit The company sold the units at $2,200 per unit on the following dates. Sales Jul 10 Jul 25 15 units 22 units For specific identification method, units sold consist of 20 units from the beginning inventory and 17 units from the Jul 20 purchases. Required: (a) Compute the cost of inventory on hand at 31 July and the cost of goods sold for July 2020 under: (i) FIFO method. Specific identification method. (20 marks) (b) Explain the effects of the FIFO method on the value of ending inventory and profit for July 2020. (10 marks) Due to Covid-19, the company has not been performing well. Thus, the CEO asked the accountant to change the inventory method to report better financial performance. The CEO explained that the accounting standards allow companies to change inventory methods. The CEO added that the accountant can always switch back the inventory method when things return to normal after Covid-19. Explain whether you agree or disagree with the CEO to change the inventory method for earnings management purpose. You should also discuss the impacts on the users of the financial statements. (15 marks)