Required information

Use the following information for the Exercises below.

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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 155 units @ $ 8.00 = $ 1,240 Jan. 10 Sales 115 units @ $ 17.00 Jan. 20 Purchase 90 units @ $ 7.00 = 630 Jan. 25 Sales 95 units @ $ 17.00 Jan. 30 Purchase 210 units @ $ 6.50 = 1,365 Totals 455 units $ 3,235 210 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 245 units, where 210 are from the January 30 purchase, 5 are from the January 20 purchase, and 30 are from beginning inventory.

Exercise 5-6 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 $1,400, and that the applicable income tax rate is 40%.

2. Which method yields the highest net income?

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

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