Question

Use the following information for the Exercises below.

Skip to question

[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	200	units	@	$	12.50	=	$	2,500
Jan.	10		Sales										160	units	@	$	21.50
Jan.	20		Purchase	130	units	@	$	11.50	=		1,495
Jan.	25		Sales										140	units	@	$	21.50
Jan.	30		Purchase	300	units	@	$	11.00	=		3,300
			Totals	630	units					$	7,295		300	units

 
The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 330 units, where 300 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 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 $1,850 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?
 

multiple choice 1

• Specific identification

• Weighted average

• LIFO

• FIFO

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

multiple choice 2

• No

• Yes

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

multiple choice 3

• FIFO

• Specific identification

• Weighted average

• LIFO