Question

Compute gross profit for the month of January for Laker Company for the four inventory methods. 2. Which method yields the highest gross profit? 3. Does gross profit using weighted average fall between that using FIFO and LIFO? 4. If costs were rising instead of falling, which method would yield the highest gross profit?

Answer 1

Answer:

1. Net Income Specific Identification $255

LIFO $258

FIFO $246

Weighted Average $251

2. LIFO

3. Yes

4. FIFO

Explanation:

Particulars : Specific identification, Weighted Avg, FIFO, LIFO

Sales:  $ 2700 , 2700, 2700, 2700

Cost of Goods Sold $ 1025, 1032, 1040, 1020

Gross Profit $ 1675, 1668, 1660, 1680

Expenses $1250 , 1250, 1250, 1250

Income before taxes $425, 418, 410, 430

Income Tax $170, 167, 164, 172

Net Income $255, 251, 246, 258