Question

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

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	140	units	@	$	6.00	=	$	840
Jan.	10	Sales										100	units	@	$	15
Jan.	20	Purchase	60	units	@	$	5.00	=		300
Jan.	25	Sales										80	units	@	$	15
Jan.	30	Purchase	180	units	@	$	4.50	=		810
		Totals	380	units					$	1,950		180	units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

Exercise 5-4 Perpetual: Income effects of inventory methods LO A1

Required:

1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

Answer 1

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan							140	6	840
10-Jan				100	6	600	40	6	240
20-Jan	60	5	300				40	6	240
							60	5	300
25-Jan				40	6	240
				40	5	200	20	5	100
30-Jan	180	4.5	810				20	5	100
							180	4.5	810
TOTAL	240		1110	180		1040	200		910
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan							140	6	840
10-Jan				100	6	600	40	6	240
20-Jan	60	5	300				40	6	240
							60	5	300
25-Jan				60	5	300
				20	6	120	20	6	120
30-Jan	180	4.5	810				20	6	120
							180	4.5	810
TOTAL	240		1110	180		1020	200		930
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL WEIGHTED AVERAGE METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan							140	6	840
10-Jan				100	6	600	40	6	240
20-Jan	60	5	300				40	6	240
							60	5	300
Average							100	5.4	540
25-Jan				80	5.4	432	20	5.4	108
30-Jan	180	4.5	810				20	5.4	108
							180	4.5	810
Average							200	4.59	918
TOTAL	240		1110	180		1032	200	4.59	918
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC SPECIFIC IDENTIFICATION METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
1-Jan	140	6	840	125	6	750	15	6	90
Purchasse
20-Jan	60	5	300	55	5	275	5	5	25
30-Jan	180	45	810				180	4.5	810
TOTAL	380		1950	180		1025	200		925
			FIFO	LIFO	Average	Specific
Sales revenue			2700	2700	2700	2700
(180 units @15)
Less: COGS			1040	1020	1032	1025
Gross margin			1660	1680	1668	1675
Less: Operating expense			1250	1250	1250	1250
Net income before tax			410	430	438	425
Less: Tax			164	172	175.2	170
Income after tax			246	258	262.8	255