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Required information Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 (The following information applies to the questions displayed below.) The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Apr. 1 Oct. 1 Beginning Inventory Purchased Purchased 500 units @ $ 34 2,350 units @ $ 39 700 units @ $ 42 During Year 2, Parvin sold 3,200 units of inventory at $100 per unit and incurred $48,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $88,000, inventory of $17,000, common stock of $63,000, and retained earnings of $42,000. Exercise 5-6A Part b b. Prepare income statements using FIFO and LIFO. X Answer is not complete. PARVIN COMPANY Income Statements For the Year Ended December 31, Year 2 ! Required information For the Year Ended December 31, Year 2 FIFO Sales $ 320,000 $ 17,000 121,050 X 91,650 Cost of goods sold: From beginning inventory From 10/1 purchase From 4/1 purchase Cost of goods sold Gross profit Operating expenses Income before tax 229,700 90,300 Income tax expense 48,000 42,300 148,650 $ (106,350) Net income LIFO Sales $ 320,000 $ 17,000 X 121,050 Cost of goods sold: From beginning inventory From 4/1 purchase From 10/1 purchase Cost of goods sold Gross profit Operating expenses Income before tax 138,050 181,950 48,000 133,950