P7-4 (Algo) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3 Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data common to all four situations are sales, 500 units for $20,000; beginning inventory, 290 units; purchases, 410 units; ending inventory, 200 units; and operating expenses, $3,800. The income tax rate is 30%. Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 290 units at $10 $2,900; purchases, 410 units at $12-$4,920. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 290 units at $12 $3,480; purchases, 410 units at $10 $4,100. Use periodic inventory procedures. 2. Complete the following sentence: 3. Complete the following sentence regarding the relative effects on the cash position for each situation. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning Inventory, 290 units at $10 - $2,900; purchases, 410 units at $12 $4,920. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 290 units at $12 $3,480; purchases, 410 units at $10 = $4,100. Use periodic inventory procedures. (Round your answers to nearest dollar amount.) Show less A PRICES RISING Situation A FIFO Situation B LIFO PRICES FALLING Situation C FIFO Situation D LIFO Sales revenue $ 20,000 $ 20,000 $ 20,000 $ 20,000 Cost of goods sold: Beginning inventory 2,900 Purchases 4,920 Goods available for sale 7,820 Ending inventory 2,400 Cost of goods sold 5,420 Gross profit 14,580 Expenses 3,800 3,800 3,800 3,800 Pretax income 10,780 Income tax expense 3,234 Net income $ 7,546 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Complete the following sentence: When prices are rising. When prices are falling, the gives a higher net income than effect results. < Required 1 Required 3 > Required 1 Required 2 Required 3 Complete the following sentence regarding the relative effects on the cash position for each situation. When prices are rising, (than derives a more favorable cash position equal to < Required 2 Required 3