Sunshine, Inc., is a seller of designer sunglasses that started its business January 1, 2018. ? Sales and inventory information for January 2020 is as follows:

Part 2 ? Inventory Problem ? Continued

Sunshine is determining whether the company should elect FIFO or LIFO as its inventory method and needs your help with the following (show all computations):

1. Compute Ending Inventory under both FIFO and LIFO inventory methods.
2. Compute the amount of Gross Profit earned under the FIFO and LIFO inventory methods.
3. Which inventory option do you recommend that Sunshine use if Sunshine?s goal is to maximize its profitability? Explain your answer in no more than three sentences.
4. Which inventory option do you recommend that Sunshine use if Sunshine?s goal is to maximize its balance sheet? Explain your answer in no more than three sentences.

Inventory Transactions - January 2020 Number of Units Sunglasses Inventory Beginning Inventory - January 1, 2020 Purchases - January 3, 2020 Purchases -January 7, 2020 Purchases - January 16, 2020 $ Cost per Unit 10,000 $ 2,000 $ Sales Transactions - January 2020 January 2020 Unit Sales 13,000 January 2020 Unit Sales 650,000 3,000 $ 500 $ 20 22 25 28