90.2K

Verified Solution

Link Copied!

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

220

units

@ $8.40

=

$

1,848

Jan.

10

Sales

125

units

@$16.40

Jan.

20

Purchase

290

units

@ $7.40

=

2,146

Jan.

25

Sales

215

units

@$16.40

Jan.

30

Purchase

160

units

@ $6.40

=

1,024

Totals

670

units

$

5,018

340

units

Laker uses a perpetual inventory system. For specific identification, ending inventory consists of 330 units, where 160 are from the January 30 purchase, 80 are from the January 20 purchase, and 90 are from beginning inventory.

1.	Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $2,300, and that the applicable income tax rate is 35%. (Do not round your Intermediate calculations.)

2.	Which method yields the highest net income?
	Specific identification LIFO Weighted average FIFO

3.	Does net income using weighted average fall between that using FIFO and LIFO?
	Yes No

4.	If costs were rising instead of falling, which method would yield the highest net income?
	Weighted average Specific identification FIFO LIFO

Answer & Explanation Solved by verified expert

See Answer