91Ó°ÊÓ

Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. 1\. In each space below, place the correct sign [less than \((<)\), greater than \((>)\), or equal (=)] for each comparison, assuming periods of rising prices. a. FIFO inventory d. FIFO income tax LIFO inventory LIFO cost of goods LIFO net income b. FIFO cost of goods sold c. FIFO net income d. FIFO income tax LIFO income tax 2\. Why would management prefer to use LIFO over FIFO in periods of rising prices?

The merchandise inventory was destroyed by fire on October 11 . The following data were obtained from the accounting records: \(\begin{array}{llr}\text { Jan. 1 } & \text { Merchandise inventory } & \$ 260,000 \\ \text { Jan. 1-Oct. 11 } & \text { Purchases (net) } & 1,900,000 \\\ & \text { Sales (net) } & 3,200,000 \\ & \text { Estimated gross profit rate } & 40 \%\end{array}\) a. Estimate the cost of the merchandise destroyed. b. Briefly describe the situations in which the gross profit method is useful.