Question

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. Date Activities Units Acquired at Cost Units sold at Retail Jan. 1 Beginning inventory 180 units @ $ 10.50 = $ 1,890 Jan. 10 Sales 140 units @ $ 19.50 Jan. 20 Purchase 110 units @ $ 9.50 = 1,045 Jan. 25 Sales 130 units @ $ 19.50 Jan. 30 Purchase 260 units @ $ 9.00 = 2,340 Totals 550 units $ 5,275 270 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 280 units, where 260 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. rev: 03_14_2019_QC_CS-162819 Exercise 5-4 Perpetual: Income effects of inventory methods LO A1 Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,650, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

Answer 1

Solution 1:

Computation of ending inventory COGS under FIFO - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	180	$10.50	$1,890.00	0	$0.00	$0.00	0	$0.00	$0.00	180	$10.50	$1,890.00
10-Jan	180	$10.50	$1,890.00	0	$0.00	$0.00	140	$10.50	$1,470.00	40	$10.50	$420.00
20-Jan	40	$10.50	$420.00	110	$9.50	$1,045.00	0	$0.00	$0.00	40	$10.50	$420.00
										110	$9.50	$1,045.00
25-Jan	40	$10.50	$420.00	0	$0.00	$0.00	40	$10.50	$420.00	20	$9.50	$190.00
	110	$9.50	$1,045.00				90	$9.50	$855.00
30-Jan	20	$9.50	$190.00	260	$9.00	$2,340.00	0	$0.00	$0.00	20	$9.50	$190.00
										260	$9.00	$2,340.00
Total							270		$2,745.00	280		$2,530.00

Computation of ending inventory COGS under LIFO - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	180	$10.50	$1,890.00	0	$0.00	$0.00	0	$0.00	$0.00	180	$10.50	$1,890.00
10-Jan	180	$10.50	$1,890.00	0	$0.00	$0.00	140	$10.50	$1,470.00	40	$10.50	$420.00
20-Jan	40	$10.50	$420.00	110	$9.50	$1,045.00	0	$0.00	$0.00	40	$10.50	$420.00
										110	$9.50	$1,045.00
25-Jan	40	$10.50	$420.00	0	$0.00	$0.00	110	$9.50	$1,045.00	20	$10.50	$210.00
	110	$9.50	$1,045.00				20	$10.50	$210.00
30-Jan	20	$10.50	$210.00	260	$9.00	$2,340.00	0	$0.00	$0.00	20	$10.50	$210.00
										260	$9.00	$2,340.00
Total							270		$2,725.00	280		$2,550.00

Computation of ending inventory COGS under Weighted Average Cost - Laker Company
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	180	$10.50	$1,890	0	$0.00	$0	0	$0.00	$0	180	$10.50	$1,890
10-Jan	180	$10.50	$1,890	0	$0.00	$0	140	$10.50	$1,470	40	$10.50	$420
20-Jan	40	$10.50	$420	110	$9.50	$1,045	0	$0.00	$0	150	$9.77	$1,465
25-Jan	150	$9.77	$1,465	0	$0.00	$0	130	$9.77	$1,270	20	$9.77	$195
25-Mar	20	$9.77	$195	260	$9.00	$2,340	0	$0.00	$0	280	$9.05	$2,535
Total							270		$2,740	280		$2,535

Computation of COGS and ending inventory - Specific identification
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	180	$10.50	$1,890	165	$10.50	$1,732.50	15	$10.50	$157.50
Purchases:
20-Jan	110	$9.50	$1,045	105	$9.50	$997.50	5	$9.50	$47.50
30-Jan	260	$9.00	$2,340	0	$9.00	$0.00	260	$9.00	$2,340.00
Total	550		$5,275	270		$2,730.00	280		$2,545.00

Income Statement - Laker Company
Particulars	Specific identification	Weighted Average	FIFO	LIFO
Sales	$5,265	$5,265	$5,265	$5,265
Cost of goods sold	$2,730	$2,740	$2,745	$2,725
Gross Profit (Sales - COGS)	$2,535	$2,525	$2,520	$2,540
Expenses	$1,650	$1,650	$1,650	$1,650
Income before taxes	$885	$875	$870	$890
Income tax expense (40%)	$354	$350	$348	$356
Net Income	$531	$525	$522	$534