Ross Products sold 120,000 cases of glue at 40 per case during 20x1. Its beginning inventory con-

LO 5 - Effects of Inventory Methods sisted of 20,000 cases at a cost of 24 per case. During \(20 \times 1\) it purchased 60,000 cases at 28 per case on Cash Flows and later 50,000 cases at 30 per case. Operating expenses were \(1,100,000\), and the applicable income tax rate was 30 per cent.

Using the periodic inventory system, calculate net profit using the FIFO method and the LIFO method for costing inventory. Which alternative produces the larger cash flow? The company is considering a purchase of 10,000 cases at 30 per case just before the year end. What effect on net profit and on cash flow will this proposed purchase have under each method? (Note: What are the income tax consequences, assuming LIFO is permitted for tax purposes?)