[GOHOME2012]

Pamela Anderson's Retail Boutique asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For the year 2006, they had the following data: Beginning Inventory on Jan. 1 st (10000 units) $35,000 Cost of 110,000 units purchased $460,000 Selling price of 95,000 units sold $665,000 Total Sales returns and allowances $10,000 Operating expenses total $120,000 Units purchased consisted of 40,000 unites at $4,00 on May 10th; 50,000 units at $4,20 0n August 15th; and 20,000 units at $4,50 on November 20th. Income Taxes are 30% a. Prepare 2 multi-step income statement for 2006 using FIFO and LIFO (show all computations for inventory costing) b. Which inventory cost flow method produces the most meaningful inventory for the balance sheet? c. Which inventory cost flow method produces the most realistic and meaningful net income?