Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Laker Company reported the following January purchases and sales data for its only product. Units Acquired at Cost 155 units@ $8.00 = $1,240 Units sold at Retail 115 units @ $17.00 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals 90 units@ $7.00 = 630 95 units @ $17.00 210 units@ $6.50 = 455 units 1,365 $3,235 210 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 245 units, where 210 are from the January 30 purchase, 5 are from the January 20 purchase, and 30 are from beginning inventory. Exercise 6-4 Perpetual: Income effects of inventory methods LO A1

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet. For detailed answer refer to the supporting sheet.

Answer Firstly we have to calculate the cost of goods sold for all the four methods Specific Identification Methods = No. of units sold * Cost as per Sepcific identification method = ((90-5)*7)+((155-30)*8) = 595+1000 = $ 1595 Weighted Average Method = No. of units sold * average cost = (115*8)+((((40*8)+(90*7))/(40+90))*95) = $ 1614.23 = $ 1614.23 (rounded off to 2 decimal places) FIFO = No. of units sold * cost as per FIFO = (155*8)+(55*7) = $ 1625 LIFO = No. of units sold * cost as per LIFO = (115*8)+(90*7)+(5*8) = $ 1590

DIVI | | | S U Laker Company Income Statements For Month Ended January 31 Specific Weighted Identification average Sales (210*17) 3570 3570 Cost of goods sold 1595 1614.23 Gross Profit 1975 1955.77 2 Expenses 1400 1400 3 Income Before Taxes 575 555.77 Income taxes expense (income before taxes *40%) 230 222.31 5 Net Income 345 333.46 FIFO 3570 1625 1945 1400 545 218 327 LIFO 3570 1590 1980 1400 580 232 348