Question

Beginning Janinventory Jan.10 Sales Jan.20 Purchase Jan.25 Sales Jan.30 Purchase 210 unitse $13.50 $2, 835 150 units@ S12.50 = 1,875 320 units@ $12.00 3.840 160 units $22.50 180 units $22.50 Totals 680 units $8,550 340 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 340 units, where 320 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 $1,950, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places) Income Statements For Month Ended January 31 Specific Weighted tion FIFO LIFO Sales Cost of goods sold Gross proft 7.650 1.950 Income before taxes Income tax expense Net income 5.700 S

Answer 1

5-4)

A	B	C	D	E	F	G	H	I	J
2
3		Date	Transactions	Units	Costs per unit	Selling Price per unit	Total Cost	Total Revenue
4		1-Jan	Beginning Inventory	210	$13.50		$2,835.00
5		10-Jan	Sale	160		$22.50		$3,600.00
6		20-Jan	Purchase	150	$12.50		$1,875.00
7		25-Jan	Sale	180		$22.50		$4,050.00
8		30-Jan	Purchase	320	$12.00		$3,840.00
9			Total				$8,550.00	$7,650.00
10
11		Total Units Sold	340
12		Calculatio of cost of goods sold using Specific Identification:
13		In specific identification method, cost of specific goods sold are considered to calculated cost of goods sold.
14		Sales units:
15		10-Jan	160
16		25-Jan	180
17		Total	340
18		Specific Identification
19			Units	Cost per unit	Total
20		Beginning Inventory	210	$13.50	$2,835.00	=D20*E20
21		Purchases
22		20-Jan	150	$12.50	$1,875.00	=D22*E22
23		30-Jan	320	$12.00	$3,840.00	=D23*E23
24		Total purchases	470		$5,715.00
25		Cost of Goods Available for sale	680		$8,550.00
26		Cost of Goods Sold
27		Units from Beginning Inventory	15	$13.50	$202.50	=D27*E27
28		Units from 20 Jan Purchase	5	$12.50	$62.50	=D28*E28
29		Units from 30 Jan Purchase	320	$12.00	$3,840.00	=D29*E29
30		Total Cost of Goods Sold	340		$4,105.00	=SUM(F27:F29)
31
32		Hence using specific inventory method,
33		Cost of goods sold	$4,105
34
35		FIFO method:
36		In FIFO method invetory that is purchased first is sold first and newer inventory is sold after that.
37
38		10 Jan Sale	160
39		25 Jan Sale	180
40
41		FIFO
42			Units	Cost per unit	Total
43		Beginning Inventory	210	$13.5	$2,835
44		Purchases
45		20-Jan	150	$12.5	$1,875
46		30-Jan	320	$12.0	$3,840
47		Total purchases	470		$5,715
48		Cost of Goods Available for sale	680		$8,550
49		Cost of Goods Sold
50		Jan 20 Sale
51		Units from Beginning Inventory	160	$13.5	$2,160
52		Jan 25 Sale
53		Units from Beginning Inventory	50	$13.5	$675
54		Units from 20 Jan Purchase	130	$12.5	$1,625
55		Total Cost of Goods Sold	340		$4,460
56
57		Hence using FIFO method,
58		Cost of goods sold	$4,460
59

Using LIFO Method In LIFO method invetory that is purchased last is sold first and older in is used after that. 10 Jan Sale 25 Jan Sale 64 ni Cost per uni Total Beginning Invento 210 $13.50 $2,835 Purchases 20-Jan 30-Jan $12.50 $12.00 72 73 $3,840 $5,715 $8,550 Total Cost of Goods Available for sale Cost of Goods Sold Jan 20 Sale Units from Beginning Invento Jan 25 Sale Units from 20 Jan Purchase Units from Beginning Invento Total Cost of Goods Sold Ending Invento 75 160 $2,160 150 $1,875 340 340 $4,110 Hence using LIFO method, Cost of goods sold Weighted average method Weighted average method assumed that goods available for sale are homogeneous. Average cost is found by dividing cost of goods available for sales with number of units available for sale. Total Beginning Invento 210 20-Jan 30-Jan Total purchases Cost of Goods Available for sale 840 $5,715 $8,550 470 680 12.57 -F96/D96 Average cost per unit Number of units sold Cost of goods Sold -Number of units sold Average cost $4,275.00 =D99"D98 Ending Inventory -Cost of goods available for sale-Cost of goods sold 4,275.00 -F96-D102 Hence using weighted average method, Cost of goods sold $4,275 Income Statement: cific Identification Weighted Average FIFO $7,650.00 Sales Cost of Gross Profits Expenses Income before expenses Income tax ex Net Income 7,650.00 $4,105 3,545.00 $1,950 1,595.00 $638.00 $957.00 7,650.00$7,650.00 3,190.00 $3,210.00 -G112-G113 $1,240.00 s sold $4,460 $4,440 D84 $3,375.00 $1,950 1,425.00 $570.00 $855.00 115 $1,950 $1,950 116 $1,260.00 G114-G115 $496.00 $744.00 $504.00 |-6116*40% 118 756.00-G116-G117