Exercise 5-4 Perpetual: Income effects of inventory methods LO A1 Laker Company reported the following January purchases and sales data for its only product. Date Jan. 1 Beginning inventory 170 units Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Activities Units Acquired at Cost Units Sold at Retail 100 units @$15.40 165 units @$15.40 $7.40$1,258 240 units $6.401,536 110 units$5.40 - 520 units Totals $3,388 265 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 255 units, where 110 are from the January 30 purchase, 80 are from the January 20 purchase, and 65 are from beginning inventory Required 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,800, and that the applicable income tax rate is 39%. (Do not round your Intermediate calculations.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Identification Weighted Average LIFO Sales Cost of goods sold Gross profit Expenses Income before taxes Income tax expense Net income 2. Which method yields the highest net income? Specific identification Weighted average FIFO LIFO 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 Weighted average O LIFO FIFO