Required information E7-7 (Algo) Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3 [The following information applies to the questions displayed below.] Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Units Unit Cost $14 2,820 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($58 each) Operating expenses (excluding income tax expense) 8,860 7,970 10,870 15 20 $193,500 E7-7 Part 1 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Income Statement For the Year Ended December 31, current year Case A Case B FIFO LIFO Sales revenue $ 630,460 $ 630,460 Cost of goods sold: Beginning inventory $ 39,480 $ 39,480 292,300 Purchases 292,300 Goods available for sale 331,780 171,550 331,780 127,830 X Ending inventory Cost of goods sold Gross profit Operating expenses 160,230 470,230 193,500 203,950 X 426,510 193,500 Pretax income $ 276,730 $ 233,010 X E7-7 Part 2 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. X Answer is complete but not entirely correct. Comparison of Amounts Case A Case B FIFO LIFO Difference $ $ Pretax income Ending inventory 276,730 171,550 233,010 X $ 127,830 43,720 X 43,720 X $ $