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	240	units	@	$	16.50	=	$	3,960
Jan.	10		Sales										190	units	@	$	25.50
Jan.	20		Purchase	170	units	@	$	15.50	=		2,635
Jan.	25		Sales										190	units	@	$	25.50
Jan.	30		Purchase	380	units	@	$	15.00	=		5,700
			Totals	790	units					$	12,295		380	units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 410 units, where 380 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

rev: 03_14_2019_QC_CS-162819

Exercise 5-4 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 $2,250, 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

• Weighted average

• LIFO

• FIFO

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?

• LIFO

• FIFO

• Specific identification

• Weighted average

rev: 03_14_2019_QC_CS-162819