Question

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

300

units

@ $7.60

=

$

2,280

Jan.

10

Sales

180

units

@ $18.20

Jan.

20

Purchase

220

units

@ $6.60

=

1,452

Jan.

25

Sales

160

units

@ $18.20

Jan.

30

Purchase

340

units

@ $6.10

=

2,074

Totals

860

units

$

5,806

340

units

   

Laker uses a periodic inventory system. For specific identification, ending inventory consists of 520 units, where 340 are from the January 30 purchase, 85 are from the January 20 purchase, and 95 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 $2,600, and that the applicable income tax rate is 40%. (Round your average cost per unit to 2 decimal places.)

     

Answer 1

Correct Answer:

Laker Company
Income Statements
For the months ended January 31
	Specific identifications	weighted average	FIFO	LIFO
Sales	$           6,188.00	$                     6,188.00	$              6,188.00	$      6,188.00
Less: Cost of goods sold	$           2,449.00	$                     2,295.00	$              2,544.00	$      2,074.00
Gross profit	$           3,739.00	$                     3,893.00	$              3,644.00	$      4,114.00
Less: Expenses	$           2,600.00	$                     2,600.00	$              2,600.00	$      2,600.00
Income Before taxes	$           1,139.00	$                     1,293.00	$              1,044.00	$      1,514.00
Less: Income tax expense	$               455.60	$                         517.20	$                  417.60	$          605.60
Net income	$               683.40	$                         775.80	$                  626.40	$          908.40

Working:

Sales Revenue = 340units * $ 18.20 = $ 6188.00

               

Specific Identifications	Cost of Goods Available for sale			Cost of goods sold			Ending Inventory
	No. of units	Cost per unit	Cost of goods available for sale	No. of units	Cost per unit	Cost of goods sold	No. of units	Cost per unit	Ending Inventory
Beginning inventory	300	$           7.60	$ 2,280.00	205	$                  7.60	$            1,558	95	$                7.60	$            722.00
Purchases:
20-Jan	220	$           6.60	$ 1,452.00	135	$                  6.60	$                891	85	$                6.60	$            561.00
30-Jan	340	$           6.10	$ 2,074.00	0	$                  6.10	$                   -	340	$                6.10	$        2,074.00
Total	860	$               -	$ 5,806.00	340		$            2,449	520		$        3,357.00

Weighted Average Cost Per unit
Units		(A)	860 units
Total Cost		(B)	$              5,806
Average Cost		(C=B/A)	$                6.75

	Weighted Average
A	Total Units Available for sale			860			$            5,806.00
	Units Sold			340
	Ending Inventory Units			520
	Valuation
	Cost of Goods Sold		340		$                  6.75		$            2,295.00
B	Cost of Goods Sold		340	units			$            2,295.00
A-B	Ending Inventory		520	units			$            3,511.00

	FIFO
A	Total Units Available for sale			860			$                 5,806
	Units Sold			340
	Ending Inventory Units			520
	Valuation
	Cost of Goods Sold		300		$                  7.60		$            2,280.00
			40		$                  6.60		$                     264
B	Cost of Goods Sold		340	units			$                  2,544
A-B	Ending Inventory		520	units			$                  3,262

	LIFO
A	Total Units Available for sale			860			$                  5,806
	Units Sold			340
	Ending Inventory Units			520
	Valuation
	Cost of Goods Sold		340		$                  6.10		2,074.00
B	Cost of Goods Sold		340	units	$                  6.75		$            2,074.00
A-B	Ending Inventory		520	units			$            3,732.00

End of Answer.

Thanks