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Exercise 5-3 Perpetual: Inventory costing methods Exercise 5-3 Perpetual: Inventory costing methods P1E Laker Company reported the following January purchases and sales data for its
Exercise 5-3 Perpetual: Inventory costing methods
Exercise 5-3 Perpetual: Inventory costing methods P1E Laker Company reported the following January purchases and sales data for its only product. Date Jan. 1 Beginning inventory 140 units@$6.00-$ 840 Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Activities Units Acquired at Cost Units Sold at Retail 100 units @ $15 60 units $5.00300 80 units @ $15 180units @ $4.50= 380 units 810 $1,950 180 units Totals Required The company uses a perpetual inventory system. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) 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 Check Ending inventory: LIFO, $930; WA, $918 Exercise 5.4 Perpetual: Income effects of inventory methods A12 0 Use the data in Exercise 5-3 to prepare comparative income statements for the month of January for Laker Company similar to those shown in Exhibit 5.82 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.) 1. Which method yields the highest net income? 2. Does net income using weighted average fall above, between, or below that using FIFO and LIFO? 3. If costs were rising instead of falling, which method would yield the highest net incomeStep by Step Solution
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