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 | 225 | units | @ | $ | 15.00 | = | $ | 3,375 | ||||||||
Jan. | 10 | Sales | 175 | units | @ | $ | 24.00 | |||||||||||
Jan. | 20 | Purchase | 180 | units | @ | $ | 14.00 | = | 2,520 | |||||||||
Jan. | 25 | Sales | 210 | units | @ | $ | 24.00 | |||||||||||
Jan. | 30 | Purchase | 350 | units | @ | $ | 13.50 | = | 4,725 | |||||||||
Totals | 755 | units | $ | 10,620 | 385 | units | ||||||||||||
The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 370 units, where 350 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 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 $2,100 and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)
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2. Which method yields the highest net income?
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LIFO
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Weighted average
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FIFO
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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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Specific identification
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FIFO
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Weighted average
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LIFO
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