Periodic System Computing Cost of Sales and Gross Profit under FIFO and LIFO

The owner of Valley Cycle wants to maximize after-tax cash flows and is considering switching from FIFO. The following data are available for its first quarter of 2020. In addition, sales for the first quarter totaled 66 units, and a physical inventory taken on March 31, 2020, showed 30 units available in inventory. Valley uses the periodic inventory method.

Date		Units	Unit Cost
January 1, 2020 (beginning inventory)		18	$180
Purchases:	January 15, 2020	24	205
	February 12, 2020	30	215
	March 19, 2020	24	230

Required

a. Which of the following inventory flow methods would we recommend that Valley use to produce the greatest after-tax cash flows: FIFO or LIFO?

Answer Choices: LIFO, FIFO, or Collect more data to verify trends

b. Prepare a table showing the gross profit and gross profit percentage for each method in part a assuming all units for the quarter were sold for $300 each.

Note: Do not use any negative signs with your answers.

Note: Round the gross profit percentage to two digits after the decimal; enter 2.04 for 2.044% or 2.05 for 2.045%.

	FIFO	LIFO
Sales
Less: Cost of goods sold
Gross profit
Gross profit percentage

Please answer all parts of the question.