Question

You received partial credit in the previous attempt. Check my work 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 180 units $10.50 - $1,890 140 units @ $19.50 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase 110 units@ $ 9.50 - 1,045 130 units @ $19.50 260 units@ $ 9.00 550 units 2,340 $5,275 270 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 280 units, where 260 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 $1,650 and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.) < Prev 3 of 4 Next > X

Answer 1

Ans. 1	LAKER COMPANY
	Income Statements
	For Month Ended January 31
		Specific	Weighted	FIFO	LIFO
		identification	average
	Sales	$5,265	$5,265	$5,265	$5,265
	Cost of goods sold	-2730	-2740	-2745	-2725
	Gross profit	$2,535	$2,525	$2,520	$2,540
	Expenses	-$1,650	-$1,650	-$1,650	-$1,650
	Income before taxes (a)	$885	$875	$870	$890
	Income tax expenses (a*0.40)	-$354	-$350	-$348	-$356
	Net income	$531	$525	$522	$534
	*Sales =   Total no. of units * selling price per unit
	270 * $19.50
	$5,265
	*WORKING NOTES:
1	Specific identification:
		Available for sale				Cost of goods sold			Ending inventory
	Purchase date	Activity	Units	Rate	Cost	Units	Rate	Cost	Units	Rate	Cost
	01-Jan	Beginning inventory	180	$10.50	$1,890	165	$10.50	$1,733	15	$10.50	$158
	20-Jan	Purchases	110	$9.50	$1,045	105	$9.50	$998	5	$9.50	$48
	30-Jan	Purchases				0	$9.00	$0	260	$9.00	$2,340
	Total		290		$2,935	Cost of goods sold		$2,730	Ending inventory		$2,545
	Sold units = No. of units available on particular date - Ending inventory units on the same date.
	Purchase date	Units available (a)	Ending inventory (b)		Units sold (a - b)
	01-Jan	180	15		165
	20-Jan	110	5		105
	30-Jan	260	260		0
2	Weighted Average (Perpetual)
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Jan	180	$10.50	$1,890				180	$10.50	$1,890
	10-Jan				140	$10.50	$1,470	40	$10.50	$420
	20-Jan	110	$9.50	$1,045				150	$9.77	1465
	25-Jan				130	$9.77	$1,270	20	$9.77	$195
	30-Jan	260	$9.00	$2,340				280	$9.05	$2,535
	Total				Cost of goods sold		$2,740	Cost of Ending inventory		$2,535
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).

Cost of goods sold Rate Purchase Rate $10.50 Quantity Perpetual FIFO: Date 01-Jan 10-Jan 20-Jan Total cost Quantity 180 Total cost $1,890 Quantity 180 40 40 Balance Rate $10.50 $10.50 $10.50 $9.50 140 $10.50 $1,470 Total cost $1,890 $420 $420 $1,045 110 $9.50 $1,045 110 25-Jan 40 90 $10.50 $9.50 $420 $855 20 30-Jan 260 $9.00 $2,340 $9.50 $9.50 260 $9.00 Cost of Ending inventory $190 $190 $2,340 $2,530 $2,745 Total Cost of goods sold *In FIFO method the units that have purchased first, are released the first one and the ending inventory units remain from the last purchases. Cost of goods sold Rate Purchase Rate $10.50 Quantity Perpetual LIFO: Date 01-Jan 10-Jan 20-Jan Total cost Quantity 180 Total cost $1,890 140 $10.50 $1,470 Balance Rate $10.50 $10.50 $10.50 $9.50 Quantity 180 40 40 110 to Total cost $1,890 $420 $420 $1,045 110 $9.50 $1,045 25-Jan 110 20 $9.50 $10.50 $1,045 $210 20 30-Jan 260 $9.00 $2,340 $10.50 $9.50 260 $9.00 Cost of Ending inventory $210 $190 $2,340 $2,530 $2,725 Total Cost of goods sold *In LIFO method the units that have purchased last, are released the first one and the ending inventory units remain from the first purchases.