the following information is available to reconcile Laker Company reported the f
ID: 2467300 • Letter: T
Question
the following information is available to reconcile Laker Company reported the following January purchases and sales data for its only product Laker uses a perpetual inventory system For specific identification ending inventory consists of 270 units. where 120 are from the January 30 purchase 80 are from the January 20 purchase and 70 are from beginning inventory 1. Complete comparative income statements tor the month of January for Laker Company for the four inventory methods Assume expenses are $1 900 and that the applicable income tax rate is 30%Explanation / Answer
Cost of goods sold calculation for specific identification: cost of good sold = beginning inventory+purchases - ending inventory.
Cost of goods sold under weighted average method:
Under this method, the weighted average cost will be calculated on the basis of total cost of opening inventory and total purchase. This amount is divided by the total units available for sale to arrive at the weighted average cost and will be used to determine the cost of goods sold.
As calculated above: total goods available for sale = 550 units and its cost = 3690. weighted average cost = 3690/550 = 6.709.
Cost of goods sold = units sold*weighted average cost = 280*6.709 = $1,878.55
Under FIFO method, the ending inevntory will have the latest purchases. Ending inventory = 270 units. It will have 120 units from Jan 30 purchase and 150 units from Jan 20 purchase.
Under LIFO method, the sale will comprise of latest purchases and so ending inventory will have all units from the opening stock and earliest purchases.
The 1st sale of 105 units will be from opening stock. balance opening stock inventory = 180-105 = 75 units.
The 2nd sale of 175 units will be from Jan 20 purchase. balance of Jan 20 purchase will be = 250 - 175 = 75 units.
Balance = 270 - 75 -75 = 270-150 = 120 units. They will be from the Jan 30 purchase.
Comparative income statements: Sales = 280 units*15.6 = $4368
Units Per unit cost Total cost Beginning inventory 180 7.6 1,368 Jan 20 purchase 250 6.6 1,650 Jan 30 purchase 120 5.6 672 Total goods available for sale 550 3,690 less: ending inventory 120 from Jan 30 purchase 120 5.6 672 80 from Jan 20 purchase 80 6.6 528 70 from beginning inventory 70 7.6 532 Total ending inventory 270 1,732 Cost of goods sold 280 1,958Related Questions
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