Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 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.

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 $2,100, 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?

  • Weighted average

  • FIFO

  • Specific identification

  • LIFO

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

  • Weighted average

  • Specific identification

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Computer Accounting With QuickBooks 2021

Authors: Donna Kay

20th Edition

1264069197, 9781264069194

More Books

Students also viewed these Accounting questions