Question 7 The management of Pina Colada Corp. 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 2019 if either the FIFO or the LIFO method had been used. For 2019, the accounting records show these data: Inventories Purchases and Sales Beginning (9,450 units) $18,900 Total net sales (243,000 units) $1,008,450 Ending (22,950 units) Total cost of goods purchased (256,500 units) 718,875 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 67,500 $2.55 2 54,000 2.70 $172,125 145,800 153,900 3 2.85 54,000 81,000 4 3.05 247,050 256,500 $718,875 Operating expenses were $130,000, and the company's income tax rate is 40%. Prepare comparative condensed income statements for 2019 under FIFO and LIFO. Pina Colada Corp. Condensed Income Statements For the Year Ended December 31, 2019 FIFO LIFO Sales Revenues 1008450 1008450 $ $ Cost of Goods Sold Beginning Inventory > 18900 18900 Cost of Goods Purchased > 718875 718875 Cost of Goods Available for Sale > Ending Inventory > Cost of Goods Sold Gross Profit / (Loss) Operating Expenses 130000 130000 Income before Income Taxes Income Tax Expense 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? $ (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? Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT