Laker Company reported the following January purchases and sales data for its on

Question

Laker Company reported the following January purchases and sales data for its only product. Laker uses a perpetual inventory system. For specific identification, ending inventory consists of 510 units, where 280 are from the January 30 purchase. 80 are from the January 20 purchase, and 150 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 $3,500, and that the applicable income tax rate is 35%. (Do not round your Intermediate calculations.)

Explanation / Answer

LAKER COMPANY Income Statements (All amounts in $) For Month Ended January 31 Specific Weighted FIFO LIFO Identification Average Sales 9776 9776 9776 9776 Cost of Goods Sold 5286 5373 5446 5281 Gross Profit 4490 4403 4330 4495 Expenses 3500 3500 3500 3500 Income before Taxes 990 903 830 995 Income Tax Expense 346.5 316.05 290.5 348.25 Net Income 643.5 586.95 539.5 646.75 For Weighted Average Cost of Goods Sold is worked out as under : Qty Rate Value Opening Inventory 340 10.8 3672 Sales -185 10.8 -1998 Purchases 410 9.8 4018 Inventory + Purchases 565                  10.07 5692 Sales 335                  10.07 3374.903 Purchases 0 For FIFO, the opening stock is assumed to be sold first, and the later purchases then sold on 25/1. For LIFO, there is no purchase prior to the first sale, hence that is assumed from the opening inventory. However, subsequent sales are assumed to have been done from the January 20 purchases.

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