Question
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.
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 | 205 | units | @ | $ | 13.00 | = | $ | 2,665 | ||||||||
Jan. | 10 | Sales | 165 | units | @ | $ | 22.00 | |||||||||||
Jan. | 20 | Purchase | 140 | units | @ | $ | 12.00 | = | 1,680 | |||||||||
Jan. | 25 | Sales | 145 | units | @ | $ | 22.00 | |||||||||||
Jan. | 30 | Purchase | 310 | units | @ | $ | 11.50 | = | 3,565 | |||||||||
Totals | 655 | units | $ | 7,910 | 310 | units | ||||||||||||
The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 345 units, where 310 are from the January 30 purchase, 5 are from the January 20 purchase, and 30 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 $1,900, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)
2. Which method yields the highest net income?
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FIFO
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LIFO
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Weighted average
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Specific identification
3. Does net income using weighted average fall between that using FIFO and LIFO?
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No
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Yes
4. If costs were rising instead of falling, which method would yield the highest net income?
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Weighted average
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FIFO
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LIFO
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Specific identification
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