Required information

Use the following information for the Exercises below.

[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	175	units	@	$	10.00	=	$	1,750
Jan.	10		Sales										135	units	@	$	19.00
Jan.	20		Purchase	130	units	@	$	9.00	=		1,170
Jan.	25		Sales										140	units	@	$	19.00
Jan.	30		Purchase	250	units	@	$	8.50	=		2,125
			Totals	555	units					$	5,045		275	units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 280 units, where 250 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

Exercise 6-4 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 $1,600, 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?

• Specific identification

• LIFO

• FIFO

• Weighted average

3. Does net income using weighted average fall between that using FIFO and LIFO?

• No

• Yes

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

• Weighted average

• LIFO

• FIFO

• Specific identification