Required information

[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	210	units	@	$	13.50	=	$	2,835
Jan.	10	Sales										160	units	@	$	22.50
Jan.	20	Purchase	150	units	@	$	12.50	=		1,875
Jan.	25	Sales										160	units	@	$	22.50
Jan.	30	Purchase	320	units	@	$	12.00	=		3,840
		Totals	680	units					$	8,550		320	units

For specific identification, ending inventory consists of 360 units, where 320 are from the January 30 purchase, 5 are from the January 20 purchase, and 35 are from beginning inventory.

Required:

1. Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,950, and that the applicable income tax rate is 40%.

2. Which method yields the highest net income?

3. Does net income using weighted average fall above, between, or below that using FIFO and LIFO?

4. If costs were rising instead of falling, which method would yield the highest net income?

Complete this question by entering your answers in the tabs below.

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• Required 2
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• Required 4

Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,950, and that the applicable income tax rate is 40%. (Round your average cost per unit to 2 decimal places.)

LAKER COMPANY
Income Statements
For Month Ended January 31
	Specific	Weighted
	Identification	Average	FIFO	LIFO
Sales	$7,200.00	$7,200.00	$7,200.00	$7,200.00
Cost of goods sold
Gross profit	$7,200.00	$7,200.00	$7,200.00	$7,200.00
Expenses
Income before taxes	$7,200.00	$7,200.00	$7,200.00	$7,200.00
Income tax expense
Net income	$7,200.00	$7,200.00	$7,200.00	$7,200.00