The income statement and balance sheet as of December 31, 1996, for Thomas and Sons are provided below. The company uses the FIFO cost flow assumption. Income Statement Sales $200,000 Cost of goods sold Gross profit Selling and admin, expenses Net income Balance Sheet 130,000 $ 70,000 40,000 $ 30,000 Cash $ 35,000 Current liabilities $ 20,000 Inventory 40,000 Long-term liabilities 50,000 Noncurrent assets 120,000 Stockholders’ equity Total liabilities and 125,000 Total assets $195,000 stockholders’ equity $ 195,000 While examining the company’s financial statements, the auditor noted that the following items were ignored when the financial statements were prepared. Purchases in transit on December 31, 1996: Amount Shipping Terms $14,000 FOB shipping point Cost of inventory out on consignment 8,000 FOB destination REQUIRED:

a. Prepare the income statement and balance sheet for Thomas and Sons in light of the addi¬ tional information discovered by the auditor.

b. Does it make any difference whether Thomas uses the perpetual or the periodic inventory method? Why or why not?