Prepare comparative condensed income statements for 2020 under FIFO and LIFO.

Units purchased consisted of 35,000 units at $5.10 on May 10; 35,000 units at $5.30 on August 15; and
30,000 units at $5.60 on November 20. Income taxes are 30%.
Instructions
a. Prepare comparative condensed income statements for 2020 under FIFO and LIFO. (Show computations of ending inventory.)
b. Answer the following questions for management.
1. Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why?
2. Which inventory cost flow method produces the most meaningful net income? Why?
3. Which inventory cost flow method is most likely to approximate actual physical fl ow of the
goods? Why?
4. How much additional cash will be available for management under LIFO than under FIFO? Why?
5. How much of the gross profit under FIFO is illusory in comparison with the gross profit under LIFO?