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

280

units

@ $9.60

=

$

2,688

Jan.

10

Sales

155

units

@$17.60

Jan.

20

Purchase

350

units

@ $8.60

=

3,010

Jan.

25

Sales

275

units

@$17.60

Jan.

30

Purchase

220

units

@ $7.60

=

1,672

Totals

850

units

$

7,370

430

units

  
Required:

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 420 units, where 220 are from the January 30 purchase, 80 are from the January 20 purchase, and 120 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 $2,900, and that the applicable income tax rate is 35%. (Do not round your Intermediate calculations.)

     

2.	Which method yields the highest net income?
	FIFO Specific identification LIFO 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?
	Weighted average Specific identification LIFO FIFO

Answer 1