Root Beer Company had 200 units in beginning inventory at a total cost of $16,000. The company purchased 100 units at a total cost of $11,000. At the end of the year, Root Beer had 70 units in ending inventory.

Instructions:

A. Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost.

B. Which cost flow method would result in the highest net income?

C. Which cost flow method would result in inventories approximating current cost in the balance sheet?

D. Which cost flow method would result in Root Beer paying the least taxes in the first year?

E. Suppose Root Beer decides at year-end that they want to report a lower net income. Would they be able to

manipulate net income when using FIFO or LIFO?