Required information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $19 2,900 units @ $24 1,000 units @ $25 During Year 3, Parvin sold 3,655 units of inventory at $40 per unit and incurred $18,800 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $194,400, inventory of $7,600, common stock of $178,000, and retained earnings of $24,000. Exercise 5-6 Part a a. Prepare income statements using FIFO and LIFO. (Round intermediate calculations and final answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. PARVIN COMPANY Income Statements For the Year Ended December 31, Year 3 FIFO LIFO $ $ Sales 146,200 146,200 Cost of goods sold (86,075) (89,945) X Gross margin 60,125 56,255 X Operating expenses (18,800) (18,800) Income before tax 41,325 37,455 Income tax expense 12,398 11,237 X Net income $ 28,927 $ 26,218 X OOOO