Question: Evaluating the Effects of Three Inventory Methods on Income from Operations, Income Taxes, and Net Income (Perpetual Inventory) Following is partial information for the cost of goods sold calculation and income statement of Timber Company under three different inventory costing methods, assuming the use of a perpetual inventory system:
Required: 1. Compute cost of goods sold under the FIFO, LIFO, and weighted average inventory costing methods. (Round weighted average cost per unit to the nearest tenth of a cent; three decimal places.)
2. Prepare an income statement (up to income before income taxes) that compares each method.
3. Rank the three methods in order of highest income before income taxes.
4. Calculate income tax expense under each of the three methods, assuming income tax expense equal to 30 percent of income before income taxes.
5. Rank the three methods in order of lowest income taxes.