Question

Complete the comparative income statements of the month of January for Laker Company for the four inventory methods.

Required information (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 165 units @ $9.00 = $1,485 125 units @ $18.00 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals 118 units @ $8.00 = 880 125 units @ $18.80 230 units 505 units $7.50 = 1,725 $4,090 250 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 255 units, where 230 are from the January 30 purchase. 5 are from the January 20 purchase, and 20 are from beginning inventory. Required: 1. Complete comparative Income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1.500 and that the applicable income tax rate is 10% (Round your Intermediate calculations to 2 decimal places.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted

Answer 1

Solution:

Computation of ending inventory COGS under FIFO - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	165	$9.00	$1,485.00	0	$0.00	$0.00	0	$0.00	$0.00	165	$9.00	$1,485.00
10-Jan	165	$9.00	$1,485.00	0	$0.00	$0.00	125	$9.00	$1,125.00	40	$9.00	$360.00
20-Jan	40	$9.00	$360.00	110	$8.00	$880.00	0	$0.00	$0.00	40	$9.00	$360.00
										110	$8.00	$880.00
25-Jan	40	$9.00	$360.00	0	$0.00	$0.00	40	$9.00	$360.00	25	$8.00	$200.00
	110	$8.00	$880.00				85	$8.00	$680.00
30-Jan	25	$8.00	$200.00	230	$7.50	$1,725.00	0	$0.00	$0.00	25	$8.00	$200.00
										230	$7.50	$1,725.00
Total							250		$2,165.00	255		$1,925.00

Computation of ending inventory COGS under LIFO - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	165	$9.00	$1,485.00	0	$0.00	$0.00	0	$0.00	$0.00	165	$9.00	$1,485.00
10-Jan	165	$9.00	$1,485.00	0	$0.00	$0.00	125	$9.00	$1,125.00	40	$9.00	$360.00
20-Jan	40	$9.00	$360.00	110	$8.00	$880.00	0	$0.00	$0.00	40	$9.00	$360.00
										110	$8.00	$880.00
25-Jan	40	$9.00	$360.00	0	$0.00	$0.00	110	$8.00	$880.00	25	$9.00	$225.00
	110	$8.00	$880.00				15	$9.00	$135.00
30-Jan	25	$9.00	$225.00	230	$7.50	$1,725.00	0	$0.00	$0.00	25	$9.00	$225.00
										230	$7.50	$1,725.00
Total							250		$2,140.00	255		$1,950.00

Computation of ending inventory COGS under Weighted Average Cost - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	165	$9.00	$1,485	0	$0.00	$0	0	$0.00	$0	165	$9.00	$1,485
10-Jan	165	$9.00	$1,485	0	$0.00	$0	125	$9.00	$1,125	40	$9.00	$360
20-Jan	40	$9.00	$360	110	$8.00	$880	0	$0.00	$0	150	$8.27	$1,240
25-Jan	150	$8.27	$1,240	0	$0.00	$0	125	$8.27	$1,033	25	$8.27	$207
25-Mar	25	$8.27	$207	230	$7.50	$1,725	0	$0.00	$0	255	$7.58	$1,932
Total							250		$2,158	255		$1,932

Computation of COGS and ending inventory - Specific identification
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	165	$9.00	$1,485	145	$9.00	$1,305.00	20	$9.00	$180.00
Purchases:
20-Jan	110	$8.00	$880	105	$8.00	$840.00	5	$8.00	$40.00
30-Jan	230	$7.50	$1,725	0	$7.50	$0.00	230	$7.50	$1,725.00
Total	505		$4,090	250		$2,145.00	255		$1,945.00

Income Statement - Laker Company
Particulars	Specific identification	Weighted Average	FIFO	LIFO
Sales	$4,500	$4,500	$4,500	$4,500
Cost of goods sold	$2,145	$2,158	$2,165	$2,140
Gross Profit (Sales - COGS)	$2,355	$2,342	$2,335	$2,360
Expenses	$1,500	$1,500	$1,500	$1,500
Income before taxes	$855	$842	$835	$860
Income tax expense (40%)	$342	$337	$334	$344
Net Income	$513	$505	$501	$516