Subject 4 (25%) A. At the end of December 2020, the accounting records of XYZ firm present the following transactions for a particular merchandise that sold at 20 per unit:

Transaction Units Amount

Inventory, 1/12/2020 200 2,000

Purchase, 10/12/2020 150 1,800

Purchase, 15/12/2020 120 1,800

Purchase, 23/12/2020 170 2,720

Sale 180

Sale 120

In addition, the level of operating expenses in December is 1,500 and the tax rate is 20%. The firm has decided to distribute the after-tax profits to shareholders.

Required:3. Assume that the per unit net realizable price is 8. Which inventory cost flow assumption would produce higher level of pre-tax income? (3%)

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