Laker uses a perpetual inventory system. For specific identification, ending inv
ID: 2425449 • Letter: L
Question
Laker uses a perpetual inventory system. For specific identification, ending inventory consists of 285 units, where 130 are from the January 30 purchase, 80 are from the January 20 purchase, and 75 are from beginning inventory.
Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $2,000, and that the applicable income tax rate is 35%. (Do not round your Intermediate calculations.)
Which method yields the highest net income?
Does net income using weighted average fall between that using FIFO and LIFO?
If costs were rising instead of falling, which method would yield the highest net income?
Laker Company reported the following January purchases and sales data for its only product.Explanation / Answer
Income statement for inventory costing Methods
Particulars
Weighted Average
LIFO
FIFO
Specific Identification
Sales
4,661
4,661
4,661
4,661
Begininig Inventory
1,482
1,482
1,482
1,482
Purchases
2,522
2,522
2,522
2,522
Cost of Goods available for sale
4,004
4,004
4,004
4,004
Ending Inventory
1,967
2,128
1,808
1,883
Cost of Goods Sold
2,037
1,876
2,196
2,121
Gross Profit
2,624
2,785
2,465
2,540
Operating Expenses
2,000
2,000
2,000
2,000
Net income before tax
624
785
465
540
Income tax expense (35%)
218.57
274.75
162.75
189.00
Net income
406
510
465
351
RANK
III
I
II
IV
2.LIFO gives highest profit
3.yes
4.FIFO gives highest profit
Income statement for inventory costing Methods
Particulars
Weighted Average
LIFO
FIFO
Specific Identification
Sales
4,661
4,661
4,661
4,661
Begininig Inventory
1,482
1,482
1,482
1,482
Purchases
2,522
2,522
2,522
2,522
Cost of Goods available for sale
4,004
4,004
4,004
4,004
Ending Inventory
1,967
2,128
1,808
1,883
Cost of Goods Sold
2,037
1,876
2,196
2,121
Gross Profit
2,624
2,785
2,465
2,540
Operating Expenses
2,000
2,000
2,000
2,000
Net income before tax
624
785
465
540
Income tax expense (35%)
218.57
274.75
162.75
189.00
Net income
406
510
465
351
RANK
III
I
II
IV
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