Q1—Using LIFO, prepare a pro-forma income statement for 2008 assuming that the company sells 7,500 units each quarter at a price of $2,000 per unit with Sales General and Administration costs the same as for 2007. Q2—How would this change if the unit sales pattern was 7,500, 2,500, 17,500, 2,500 units in the four quarters? Why? Q3—Assuming 7,500 units of sales per quarter, what are the effects of using FIFO on the financial statements? Q4 - Is James Colburn suggesting to Rick Martino that they should be managing earnings rather than managing the company and its business? Although such changes are clearly permitted by the law, do you consider them to be ethical? 2007 (LIFO) Per Unit 2008 (LIFO) Per Unit Units Cost (000.$) 13,500 10,000 11,000 12,000 13,000 59,500 46,000 13,500 Units Cost ($'000) 13,500 14,000 15,000 16,000 17,000 75,500 Beginning Inventory Purchases, Quarter 1 Purchases, Quarter 2 Purchases, Quarter 3 Purchases, Quarter 4 Available for Sale Less Sales Ending Inventory 15,000 10,000 10,000 10,000 10,000 55,000 40,000 15,000 900 1,000 1,100 1,200 1,300 15,000 10,000 10,000 10,000 10,000 55,000 40,000 15,000 900 1,400 1,500 1,600 1,700 Footnote to the Pro-forma Accounts Total Inventories under the first-in, first-out ("FIFO") method Less: Last-in, first-out method (LIFO) adjustments Total Inventory 2007 19,000 (5,500) 13,500 Income Statement (thousands of dollars 2007 (LIFO) $67,000 46,000 $21,000 10,000 $11,000 3,850 $7,150 Sales Cost of goods sold Gross margin Selling and admin. exp. Income before taxes Income taxes (35%) Net income