Instructions I. Perpetual inventory system (0a) Prepare comparative condensed income statements for 2021 under FIFO and LIFO. (Show computations of COGS.) (1a) Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? Why? (2a) Which cost flow method (FIFO or LIFO) produces the more meaningful net income? Why? (3a) Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of the goods? Why? (4a) How much additional cash will be available for management under LIFO than under FIFO? Why? (5a) Will gross profit under the average-cost method be higher or lower than (i) FIFO and (ii) LIFO?

The management of Patel Co. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. They request your help in determining the results of operations for 2021 if either the FIFO method or the LIFO method had been used. For 2021, the accounting records show the following data. Inventories Beginning (15,000 units) Ending (28,000 units) $32,000 Purchases and Sales Total net sales (217,000 units) Total cost of goods purchased (230,000 units) $865,000 600,000 Purchases were made quarterly as follows. Quarter Units 1 60,000 2 50,000 3 50,000 4 70,000 230,000 Unit Cost $2.40 2.50 2.70 2.80 Total Cost $144,000 125,000 135,000 196,000 $600,000 Patel Co made sales at the end of each quarter as follows. Quarter Units sold 1 50,000 2 45,000 3 60,000 4 62,000 217,000 Operating expenses were $147,000, and the company's income tax rate is 34%