Reference no: EM131793690

Exercise Perpetual: Income effects of inventory methods

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

350

units

@  $11.00

=

$

3,850

Jan.

10

Sales

190

units

Jan.

20

Purchase

420

units

@  $10.00

=

4,200

Jan.

25

Sales

345

units

Jan.

30

Purchase

290

units

@  $9.00

=

2,610

Totals

1,060

units

$

10,660

535

units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 525 units, where 290 are from the January 30 purchase, 80 are from the January 20 purchase, and 155 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 $3,600, and that the applicable income tax rate is 39%. (Do not round your Intermediate calculations.)

Laker Company Income statement For Month Ended January 31
Specific	Weighted
Identification	Average	FIFO	LIFO
Sales	$10,165	$10,165	$10,165	$10,165
Cost of goods sold	5,545
Gross profit	4,620	10,165	10,165	10,165
Expenses	3,600	3,600	3,600	3,600
Income before taxes	1,020	6,565	6,565	6,565
Income tax expense	398
Net income	$622	$6,565	$6,565	$6,565