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:

		Units	Unit Cost
Inventory, December 31, prior year		6,800	$ 8
For the current year:
Purchase, March 5		18,800	6
Purchase, September 19		9,800	2
Sale ($30 each)		8,000
Sale ($32 each)		15,800
Operating expenses (excluding income tax expense)	$ 398,000

Required:

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.

Compute the difference between the pretax income and the ending inventory amounts for the two cases.

Which inventory costing method may be preferred for income tax purposes?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3

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.

GIVOLY INCORPORATED
Income Statement
For the Year Ended December 31, current year
	Case A	Case B
	FIFO	LIFO
Cost of goods sold:
Beginning inventory
Purchases
Purchases
Goods available for sale	0		0
Sales revenue
Cost of goods sold
Pretax income/loss

• required 2

Compute the difference between the pretax income and the ending inventory amounts for the two cases.

	Comparison of Amounts
Case A	Case B	Difference
FIFO	LIFO
Pretax income
Ending inventory

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3

Which inventory costing method may be preferred for income tax purposes?

	Which inventory costing method may be preferred for income tax purposes?