The following information pertains to the inventory of Parvin Company during Year 2:

Jan. 1	Beginning Inventory	450	units	@	$	32
Apr. 1	Purchased	2,250	units	@	$	37
Oct. 1	Purchased	650	units	@	$	40

During Year 2, Parvin sold 3,000 units of inventory at $95 per unit and incurred $47,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $87,000, inventory of $14,400, common stock of $62,000, and retained earnings of $39,400.

Exercise 5-6A Part a

Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) fifo

Cash					Merchandise Inventory
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Common Stock					Retained Earnings
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Sales Revenue					Cost of Goods Sold
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Operating Expenses					Income Tax Expense
Beg. Bal					Beg. Bal
End. Bal					End. Bal

b. Prepare income statements using FIFO and LIFO. c. Determine the amount of income tax that Parvin would pay using each cost flow method. d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)