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:

Inventory, December 31, prior year. 7800. $10

For the current year:

Purchase, March 5. 19800 8

Purchase, September 19 10,800. 4

Sale ($26 each) 8,800

Sale ($28 each) 16800

Operating expenses (excluding income tax expense) $408,000

1. prepare a separate income statement through pretax income that details the 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?