Question

In: Accounting

Laker Company reported the following January purchases and sales data for its only product. Date Activities...

Laker Company reported the following January purchases and sales data for its only product.

Date Activities Units Acquired at Cost Units sold at Retail
Jan. 1 Beginning inventory 150 units @ $ 7.50 = $ 1,125
Jan. 10 Sales 110 units @ $ 16.50
Jan. 20 Purchase 80 units @ $ 6.50 = 520
Jan. 25 Sales 90 units @ $ 16.50
Jan. 30 Purchase 200 units @ $ 6.00 = 1,200
Totals 430 units $ 2,845 200 units


The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 230 units, where 200 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

Required:

1.
Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,350, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)



2. Which method yields the highest net income?

  • Specific identification

  • Weighted average

  • LIFO

  • FIFO



3. Does net income using weighted average fall between that using FIFO and LIFO?

  • Yes

  • No



4. If costs were rising instead of falling, which method would yield the highest net income?

  • FIFO

  • LIFO

  • Specific identification

  • Weighted average

Solutions

Expert Solution

1. Comparative income statements for the month of January for Laker Company for the four inventory methods.

2. LIFO yields the highest net Income.

3. Yes net income using weighted average fall between that using FIFO and LIFO.

4. If costs were rising instead of falling FIFO method would yield the highest net income


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