Zeigler Corporation began operations in 2010. At the beginning of the year, the company purchased plant assets of $900,000, with an estimated useful life of 10 years and no residual value. During the year, the company had net sales of $1,300,000 salaries expense of $200,000, and other expenses of $80,000, excluding depreciation. In addition, Zeigler Corporation purchase inventory as follows:

At the end of the year, a physical inventory disclosed 500 units still on hand. The managers of Zeigler Corporation know they have a choice of accounting methods, but they are unsure how those methods will affect net income. They have heard of the FIFO and LIFO inventory methods and the straight-line and double declining-balance depreciation methods.

Required
1. Prepare two income statements for Zeigler Corporation, one using the FIFO and Straight-line methods and the other using the LIFO and double-declining-methods. Ignore income taxes.
2. Prepare a schedule accounting for the difference in the two net income figures obtained in requirement 1.
3. What effect does the choice of accounting method have on Zeigler's inventory turnover? What conclusions can you draw? Use the year-end balance to compute the ratio.
4. How does the choice of accounting methods affect Zeigler's return on assets? Assume the company's only assets are cash $80,000, inventory, and plant assets. Use year-end balances to compute the ratio. Is your evaluation of Zeigler's profitability affect by choice of accountingmethods?

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Jan. 15 Mar. 20 June 15 Sept. 18 Dec. 9 Total 400 units $400 S160,000 81,600 332,800 247,200 126,000 $947,600 200 units at S408 800 units at S416 600 unis t $412 300 units at $420 2,300 units