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Accounting

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Laker Company reported the following January purchases and sales data for its only product. For specific identification, ending inventory consists of 385 units from the January 30 purchase, 5 units from the January 20 purchase, and 15 units from beginning inventory.

Date Activities Units Acquired at Cost Units sold at Retail
January 1 Beginning inventory 225 units @ $ 15.00 = $ 3,375
January 10 Sales 175 units @ $ 24.00
January 20 Purchase 180 units @ $ 14.00 = 2,520
January 25 Sales 210 units @ $ 24.00
January 30 Purchase 385 units @ $ 12.00 = 4,620
Totals 790 units $ 10,515 385 units

Assume the perpetual inventory system is used.

Required:

  1. 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?
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