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 The Company uses a perpetual inventory system. 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. 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 $1700 and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average FIFO 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 FIFO 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? LIFO FIFO