Question

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. Units sold at Retail Units Acquired at Cost 215 units @ $14.00 = $3,010 165 units @ $23.00 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Tan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals 160 units @ $13.00 = 2,080 190 units @ $23.00 $12.50 = 330 units @ 705 units 4, 125 $9, 215 355 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 350 units, where 330 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 $2,000 and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average FIFO L IFO Sales Cost of goods sold Gross profit Expenses Income before taxes Income tax expense Net income

Answer 1

	CALCULATION OF COST OF GOODS SOLD:
1]	Specific identificaion:
	Ending inventory = 330*12.50+5*13+15*14 =	$         4,400.00
	COGS = 9215-4400 =	$         4,815.00
2]	Weighted average:
	COGS for sale on Jan 10 = 165*14 =	$         2,310.00
	WA after Purchase on Jan 20 = (50*14+160*13)/(50+160) =	$               13.24
	COGS on Jan 25 = 190*13.24 =	$         2,515.60
	Total COGS	$         4,825.60
	Ending inventory = 9215-4825 =	$         4,390.00
3]	FIFO:
	COGS = 165*14+50*14+140*13 =	$         4,830.00
	Ending inventory = 9215-4830 =	$         4,385.00
4]	LIFO:
	COGS = 165*14+160*13+30*14 =	$         4,810.00
	Ending inventory = 9215-4810 =	$         4,405.00
	ANSWERS:
1]		Specific Identification	Weighted Average	FIFO	LIFO
	Sales	$         8,165.00	$      8,165.00	$         8,165.00	$        8,165.00
	Cost of goods sold	$         4,815.00	$      4,825.60	$         4,830.00	$        4,810.00
	Gross profit	$         3,350.00	$      3,339.40	$         3,335.00	$        3,355.00
	Expenses	$         2,000.00	$      2,000.00	$         2,000.00	$        2,000.00
	Income before taxes	$         1,350.00	$      1,339.40	$         1,335.00	$        1,355.00
	Income tax expense [40%]	$    540.00	$ 535.76	$            534.00	$ 542.00
	Net income	$    810.00	$ 803.64	$            801.00	$ 813.00
2]	LIFO
3]	YES
4]	FIFO, as COGS would be lowest