IBT uses the LIFO inventory cost flow assumption. As of December 31, 2018, IBT had 800 items in its inventory, and the $9,000 inventory dollar amount reported on the balance sheet consisted of the following: When Purchased Number of Items Cost per Item Total 2010 600 $10 $6,000 2012 200 15 3,000 Total 800 $9,000 During 2019, IBT purchased 300 items at $30 each. Sales were 900 items at a price of $50 each. Expenses other than cost of goods sold totaled $8,000 and the federal income tax rate is 30 percent of taxable income.

When Purchased Number of Items Cost per Item Total 2010 600 $10 $6,000 2012 200 15 3,000 Total 800 $9,000

Required: a. Assume that IBT purchased an additional 600 items on December 20, 2019 for $30 each. Prepare IBTs income statement for the year ending December 31, 2019. b. Assume instead that IBT did not purchase the additional 600 items on December 20, 2019. Prepare IBTs income statement for the year ending December 31, 2019. c. Compare the two income statements, and discuss why it might have been wise for IBT to purchase the additional items in December 2019. Discuss some of the disadvantages of such a strategy.