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

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	190	units	@	$	7.00	=	$	1,330
Jan.	10		Sales										150	units	@	$	16.00
Jan.	20		Purchase	110	units	@	$	6.00	=		660
Jan.	25		Sales										130	units	@	$	16.00
Jan.	30		Purchase	280	units	@	$	5.50	=		1,540
			Totals	580	units					$	3,530		280	units

 The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 300 units, where 280 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 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 $1,750, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average FIFO LIFO Sales $4,480selected answer correct $4,480selected answer correct $4,480selected answer correct $4,480selected answer correct Cost of goods sold 1,855selected answer correct 1,865selected answer correct 1,870selected answer correct 1,850selected answer correct Gross profit 2,625 2,615 2,610 2,630 Expenses 1,750selected answer correct 1,750selected answer correct 1,750selected answer correct 1,750selected answer correct Income before taxes 875 865 860 880 Income tax expense 350selected answer correct 346selected answer correct 344selected answer correct 352selected answer correct Net income $525 $519 $516 $528

2. Which method yields the highest net income?

• 
  

  LIFO 
• 
  

  Specific identification
• 
  

  FIFO
• 
  

  Weighted average

3. Does net income using weighted average fall between that using FIFO and LIFO?

• 
  

  No
• 
  

  Yes 

4. If costs were rising instead of falling, which method would yield the highest net income?

• 
  

  Specific identification
• 
  

  Weighted average
• 
  

  FIFO 
• 
  

  LIFO

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