Periodic Inventory by Three Methods follows: 1. Determine the cost of the inventory on December 31 by the first-in, first-out method. costs, enter the units PURCHASED MOST RECENTLY first. 2. Determine the cost of the inventory on December 31 by the last-in, first-out method. costs, enter the OLDEST units first. 4b. Which inventory method would be preferred for income tax purposes in periods of declining prices