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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

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 140 units @ $ 6.00 = $ 840
Jan. 10 Sales 100 units @ $ 15
Jan. 20 Purchase 60 units @ $ 5.00 = 300
Jan. 25 Sales 80 units @ $ 15
Jan. 30 Purchase 180 units @ $ 4.50 = 810
Totals 380 units $ 1,950 180 units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 200 units, where 180 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 $1,250, 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?

  • FIFO
  • Specific identification
  • LIFO
  • Weighted average
3. Does net income using weighted average fall between that using FIFO and LIFO?

  • Yes
  • No
4. If costs were rising instead of falling, which method would yield the highest net income?

  • FIFO
  • Specific identification
  • Weighted average
  • LIFO

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