In: Accounting
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 180 units @ $ 10.50 = $ 1,890 Jan. 10 Sales 140 units @ $ 19.50 Jan. 20 Purchase 110 units @ $ 9.50 = 1,045 Jan. 25 Sales 130 units @ $ 19.50 Jan. 30 Purchase 270 units @ $ 9.00 = 2,430 Totals 560 units $ 5,365 270 units The company uses a periodic inventory system. For specific identification, ending inventory consists of 290 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.
1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,650, and that the applicable income tax rate is 40%. (Round intermediate calculations and final answers to 2 decimal places.)
specific identification | weighted average | FIFO | LIFO | |
sales | ||||
cost of goods | ||||
gross profit | ||||
expenses | ||||
income before taxes | ||||
income tax expense |
Net income [ ][ ][ ][ ]
2. Which method yields the highest net income?
Specific identification | |
LIFO | |
FIFO | |
Weighted average |
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?
Specific identification | |
LIFO | |
FIFO | |
Weighted average |