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	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.

Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,700, 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

Which method yields the highest net income?

Specific identification

LIFO

FIFO

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?

Weighted average

LIFO

FIFO

Specific identification