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. Activities Units Acquired at Cost Units sold at Retail Jan. 1 Beginning inventory 140 units @ $6.00 - $340 100 units@ $15 60 units @ $5.00 = 80 units @ $15 180 units@ $4.50 - Totals 180 units Date 300 Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase 810 $1,950 380 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory

Answer 1

Specific idenification Cost of Goods sold Goods Purchases Inventory on Hand Date Qty Cost of Cost per unit # of units sold Cost per unit Goods sold # of units Cost per Inventory unit Balance 140 Jan-01 Jan-10 Jan-20 100 $ 6.00 $ 600.00 60 $ 5.00 40 40 60 Jan-25 25 55 $ $ 6.00 $ 150.00 5.00 $ 275.00 15 5 15 5 $ 6.00 $ 840.00 $ 6.00 $ 240.00 $ 6.00 $ 240.00 $ 5.00 $ 300.00 $ 6.00 $ 90.00 $ 5.00 $ 25.00 $ 6.00 $ 90.00 $ 5.00 $ 25.00 $ 4.50 $ 810.00 $ 925.00 Jan-30 180 $ 4.50 180 200 180 1,025.00 Totals Ending Inventory Cost of Goods sold 200 units 180 units $ $ 925 1,025 Weighted Average Cost of Goods sold Goods Purchases Inventory on Hand Date Qty Cost of Cost per unit # of units sold cost per unit Goods sold # of units Cost per Inventory unit Balance 140 100 $ 6.00 $ 600.00 40 60 $ 5.00 100 Jan-01 Jan-10 Jan-20 Jan-25 Jan-30 Totals $ $ $ $ $ 6.00 $ 840.00 6.00 $ 240.00 5.40 $ 540.00 5.40 $ 108.00 4.59 $ 918.00 $ 918.00 80 $ 5.40 $ 432.00 20 180 $ 4.50 200 200 180 1,032.00 Ending Inventory Cost of Goods sold 200 units 180 units $ $ 918 1,032

Perpetual First In First Out method (FIFO) Cost of Goods sold Goods Purchases Inventory on Hand Date Date Qty Cost of Cost per unit # of units sold cost per unit Goods sold # of units Cost per Inventory unit Balance 140 Jan-01 Jan-10 100 $ 6.00 $ 600.00 40 $ $ $ $ 6.00 $ 840.00 6.00 $ 240.00 6.00 $ 240.00 5.00 $ 300.00 Jan-20 60 $ 5.00 40 60 Jan-25 40 $ $ 6.00 $ 240.00 5.00 $ 200.00 40 20 S Jan-30 180 $ 4.50 20 $ 5.00 $ 100.00 5.00 $ 100.00 4.50 $ 810.00 $ 910.00 $ 180 200 180 1,040.00 Totals Ending Inventory Cost of Goods sold 910 200 units 180 units $ $ 1,040 Perpetual Last In First Out method (LIFO) Cost of Goods sold Goods Purchases Inventory on Hand Date Qty Cost of Cost per unit # of units sold cost per unit Goods sold # of units Cost per Inventory unit Balance 140 Jan-01 Jan-10 Jan-20 100 $ 6.00 $ 600.00 40 $ $ $ $ 6.00 $ 840.00 6.00 $ 240.00 6.00 $ 240.00 5.00 $ 300.00 60 $ 5.00 40 60 Jan-25 60 $ $ 5.00 $ 300.00 6.00 $120.00 20 20 Jan-30 180 $ 4.50 20 $ $ $ 6.00 $ 120.00 6.00 $ 120.00 4.50 $ 810.00 $ 930.00 180 200 180 1,020.00 Totals Ending Inventory Cost of Goods sold 200 units 930 $ $ 180 units 1,020

Solution 1) Sales Cost of Goods sold Gross Profit Expenses Income before taxes Income tax expenses Net income LAKER COMPANY Income Statements for month ended January 31 Specific Weighted Identification Average $ 2,700 $ 2,700 $ $ 1,025 $ 1,032 $ $ 1,675 $ 1,668 $ $ 1,250 $ 1,250 $ $ 425 $ 418 $ $ 170 $ 167 $ $ 255 $ 251 $ FIFO 2,700 $ 1,040 $ 1,660 $ 1,250 $ 410 $ 164 $ 246 $ LIFO 2,700 1,020 1,680 1,250 430 172 258 Solution 2 Which Income yields the highest Net Income Answer LIFO Solution 3 Does Net Income using weighted average fall between that using FIFO and LIFO ? Answer YES Solution 4 If Costs were rising instead of falling, which method would yield the highest net Income? Answer FIFO

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