There are several methods available to calculate the value of a companyâs inventory (FIFO, LIFO, Average Cost, Specific Identification, Lower of Cost or Market). Pick one method and provide a company that uses that method and a valid reason why you think the company has chosen that method.
There are several methods available to calculate the value of a companyâs inventory (FIFO, LIFO, Average Cost, Specific Identification, Lower of Cost or Market). Pick one method and provide a company that uses that method and a valid reason why you think the company has chosen that method.
Related questions
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 | 120 units @ $19.50 | |
| Jan. 20 | Purchase | 110 units @ $9.50 = 1,045 | |
| Jan- 25 | Sales | 150 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, inventory al inventory system.
Required
1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are S1.650, and that the applicable income tax rate is 40%. (Round your intermediate calculations to 2 decimal places.)
2. Which method yields the highest net income?
_____ Specific identification
_____ LIFO
_____ Weighted average
_____ FIFO
3. Does net income use a weighted average fall between that using FIFO and LIFO?
