Evaluating the choice among three alternative inventory methods based on cash flow effects lo7-2, 7-3following is partial information for the income statement of audio solutions company under three different inventory costing methods, assuming the use of a periodic inventory system: required: 1. compute cost of goods sold under the fifo, lifo, and average cost inventory costing methods. (do not round intermediate calculations.)cogsbeg inventory (400 units @ $28)purchases (475 units @35)goods availableending inventory (525)cogs2. prepare an income statement through pretax income for each method. sales, 350 units; unit sales price, $50; expenses, $1,700need preparing income statement3. rank the three methods in order of income taxes paid (favorable cash flow).

FIFO

Weighted average

LIFO

Explanation:

Beg inventory (400 units @ $28)    $  11,200

Purchases        (475 units @ $35)   $ 16,625  

Goods available    875 units            $ 27,825

W/A 27,825 / 875 = $31.8

LIFO will use first the newest units thus, the more expenses ($35) making a higher COGS

while FIFO will use first the oldest units thus, more cheap( $28) making lower COGS

W/A will fit between them

As FIFO makes COGS lower the income will be higher thus, taxes too.

W/A will follow as used 31.8 units

and then, LIFO with the higher COGS

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"

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