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Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2:

		Units	Unit Cost
Inventory, December 31, prior year		6,900	$ 13
For the current year:
Purchase, March 5		18,900	11
Purchase, September 19		9,900	7
Sale ($29 each)		7,900
Sale ($31 each)		15,900
Operating expenses (excluding income tax expense)	$ 399,000

Required:

1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.

2. Compute the difference between the pretax income and the ending inventory amounts for the two cases.

3. Which inventory costing method may be preferred for income tax purposes?

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Note: Loss amounts should be indicated with a minus sign.

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Note: Loss amounts should be indicated with a minus sign.

GIVOLY INCORPORATED
Income Statement
For the Year Ended December 31, current year
	Case A		Case B
	FIFO		LIFO
Cost of goods sold:
Goods available for sale	0		0
Cost of goods sold
Pretax income/loss

Compute the difference between the pretax income and the ending inventory amounts for the two cases.

	Comparison of Amounts
	Case A	Case B	Difference
	FIFO	LIFO
Pretax income
Ending inventory

Which inventory costing method may be preferred for income tax purposes?

Which inventory costing method may be preferred for income tax purposes?