Use the data in Exercise 5-3 to prepare comparative income statements for the month of January for Laker Company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250 and that the applicable income tax rate is 40%. (Round amounts to cents.)
2. Does net income using weighted average fall above, between, or below that using FIFO and LIFO?
Net income under the weighted average method falls between the net income calculated under LIFO and FIFO methods.
Operating Profit is defined as the benefits generated solely from the basic business function. It is used to calculate the net income of the business entity.
Net income under FIFO is lower than calculated under weighted average, while net income under LIFO is higher than net income under specific identification.
Specific Identification Method
Weighted Average Method
Less: Cost of goods sold
Less: 40% income tax
Wattan Company reports beginning inventory of 10 units at $60 each. Every week for four weeks it purchases an additional 10 units at respective costs of $61, $62, $65, and $70 per unit for weeks 1 through 4.
Compute the cost of goods available for sale and the units available for sale for this four-week period. Assume that no sales occur during those four weeks.
Martinez Company’s ending inventory includes the following items. Compute the lower of cost or market for ending inventory applied separately to each product.
Cost per unit
Market per unit
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