Problem 6-4A The management of Gresa Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2017 if either the FIFO or the LIFO method had been used. For 2017, the accounting records show these data: Inventories Purchases and Sales Beginning (10,000 units) $20,000 Total net sales (183,000 units) $896,700 Ending (17,000 units) Total cost of goods purchased (190,000 units) 492,000 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 50,000 $2.40 $120,000 40,000 2.50 100,000 40,000 2.60 104,000 60,000 2.80 168,000 190,000 $492,000 2 3 4 Operating expenses were $100,000, and the company's income tax rate is 40%. Prepare comparative condensed income statements for 2017 under FIFO and LIFO. GRESA INC. Condensed Income Statements For the Year Ended December 31, 2017 FIFO LIFO Sales Revenues $ $ Cost of Goods Sold Net Income /(Loss) Answer the following questions for management. (1) Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? (2) Which cost flow method (FIFO or LIFO) produces the more meaningful net income? (3) Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of goods? (4) How much more cash will be available for management under LIFO than under FIFO? LIFO method > FIFO method Lower (5) Will gross profit under the average-cost method be higher or lower than FIFO? Will gross profit under the average-cost method be higher or lower than LIFO? Higher