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