Question

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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	185	units	@	$	11.00	=	$	2,035
Jan.	10	Sales										145	units	@	$	20.00
Jan.	20	Purchase	100	units	@	$	10.00	=		1,000
Jan.	25	Sales										125	units	@	$	20.00
Jan.	30	Purchase	270	units	@	$	9.50	=		2,565
		Totals	555	units					$	5,600		270	units

For specific identification, ending inventory consists of 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory.

Required:

1. Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,700, and that the applicable income tax rate is 40%.

Answer 1

Income Statement
	FIFO	LIFO	W. Avg	SP. ID
Sales Revenue	$             5,400	$                5,400	$          5,400	$          5,400
Cost of Goods Sold	$             2,885	$                2,870	$          2,881	$          2,875
Gross Margin	$             2,515	$                2,530	$          2,519	$          2,525
Expenses	$             1,700	$                1,700	$          1,700	$          1,700
Income before income tax	$                 815	$                   830	$             819	$             825
Income tax expense	$                 326	$                   332	$             328	$             330
Net Income	$                 489	$                   498	$             492	$             495

Working

	FIFO	Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	185	$               11.00	$          2,035				185	$           11.00	$       2,035
Jan-10	Sales				145	$            11.00	$       1,595	40	$           11.00	$          440
Jan-20	Purchase	100	$               10.00	$          1,000				40	$           11.00	$          440
								100	$           10.00	$       1,000
Jan-25	Sales				40	$            11.00	$          440
					85	$            10.00	$          850	15	$           10.00	$          150
Jan-30	Purchase	270	$                  9.50	$          2,565				15	$           10.00	$          150
								270	$             9.50	$       2,565
	Total	555		$          5,600	125		$      2,885	285		$      2,715
	LIFO	Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	185	$               11.00	$          2,035				185	$           11.00	$       2,035
Jan-10	Sales				145	$            11.00	$       1,595	40	$           11.00	$          440
Jan-20	Purchase	100	$               10.00	$          1,000				40	$           11.00	$          440
								100	$           10.00	$       1,000
Jan-25	Sales				100	$            10.00	$       1,000	15	$           11.00	$          165
					25	$            11.00	$          275
Jan-30	Purchase	270	$                  9.50	$          2,565				15	$           11.00	$          165
								270	$             9.50	$       2,565
	Total	555		$          5,600	125		$      2,870	285		$      2,730
	W. Avg	Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	185	$               11.00	$          2,035				185	$           11.00	$       2,035
Jan-10	Sales				145	$            11.00	$       1,595	40	$           11.00	$          440
Jan-20	Purchase	100	$               10.00	$          1,000				140	$           10.29	$       1,440
Jan-25	Sales				125	$            10.29	$       1,286	15	$           10.29	$          154
Jan-30	Purchase	270	$                  9.50	$          2,565				285	$             9.54	$       2,719
	Total	555		$          5,600	125		$      2,881	285		$      2,719
	Sp. ID	Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	185	$               11.00	$          2,035				185	$           11.00	$       2,035
Jan-10	Sales				145	$            11.00	$       1,595	40	$           11.00	$          440
Jan-20	Purchase	100	$               10.00	$          1,000				40	$           11.00	$          440
								100	$           10.00	$       1,000
Jan-25	Sales				30	$            11.00	$          330	10	$           11.00	$          110
					95	$            10.00	$          950	5	$           10.00	$            50
Jan-30	Purchase	270	$                  9.50	$          2,565				10	$           11.00	$          110
								5	$           10.00	$            50
								270	$             9.50	$       2,565
	Total	555		$          5,600	125		$      2,875	285		$      2,725