Laker Company reported the following January purchases and sales data for its only product. The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 250 units from the January 30 purchase, 5 units from the January 20 purchase, and 20 units from beginning inventory. Date January 1 January 10 January 20 January 25 January 30 Activities Beginning inventory Sales Purchase Sales Purchase Totals Units Acquired at Cost $ 9.00 = $ 8.00 = $ 7.50 = 165 units @ 110 units @ 250 units @ 525 units $ 1,485 880 1,875 $ 4,240 Units sold at Retail 125 units 125 units 250 units $ 18.00 $ 18.00

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Chapter1: Financial Statements And Business Decisions
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Laker Company reported the following January purchases and sales data for its only product. The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 250 units from the January 30 purchase, 5 units from the January 20 purchase, and 20 units from beginning inventory.

| Date       | Activities          | Units Acquired at Cost  | Units Sold at Retail |
|------------|---------------------|-------------------------|----------------------|
| January 1  | Beginning inventory | 165 units @ $9.00 = $1,485 |                      |
| January 10 | Sales               |                         | 125 units @ $18.00   |
| January 20 | Purchase            | 110 units @ $8.00 = $880  |                      |
| January 25 | Sales               |                         | 125 units @ $18.00   |
| January 30 | Purchase            | 250 units @ $7.50 = $1,875 |                      |
| **Totals** |                     | **525 units** = $4,240  | **250 units**        |
Transcribed Image Text:Laker Company reported the following January purchases and sales data for its only product. The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 250 units from the January 30 purchase, 5 units from the January 20 purchase, and 20 units from beginning inventory. | Date | Activities | Units Acquired at Cost | Units Sold at Retail | |------------|---------------------|-------------------------|----------------------| | January 1 | Beginning inventory | 165 units @ $9.00 = $1,485 | | | January 10 | Sales | | 125 units @ $18.00 | | January 20 | Purchase | 110 units @ $8.00 = $880 | | | January 25 | Sales | | 125 units @ $18.00 | | January 30 | Purchase | 250 units @ $7.50 = $1,875 | | | **Totals** | | **525 units** = $4,240 | **250 units** |
## Laker Company Inventory Analysis

### Instructions

1. **Compute gross profit for the month of January for Laker Company using the four inventory methods**:
   - Specific Identification
   - Weighted Average
   - FIFO (First-In, First-Out)
   - LIFO (Last-In, First-Out)

2. **Determine which method yields the highest gross profit.**

3. **Assess whether the gross profit using the weighted average method falls between that of using FIFO and LIFO.**

4. **Analyze the scenario where costs are rising instead of falling, and identify which method would yield the highest gross profit.**

### Calculation Guidelines

Complete this analysis by entering your answers in the designated tabs.

#### Data Table: Gross Profit Computation

- **Sales**: To be computed for each method.
- **Cost of Goods Sold (COGS)**: To be computed for each method.
- **Gross Profit**: Calculate for each method using the formula:

  \[
  \text{Gross Profit} = \text{Sales} - \text{Cost of Goods Sold}
  \]

**Note**: Round cost per unit to two decimal places and final answers to the nearest whole dollars.

---
This exercise will help you understand the impact of different inventory valuation methods on gross profit, vital for strategic financial planning and analysis.
Transcribed Image Text:## Laker Company Inventory Analysis ### Instructions 1. **Compute gross profit for the month of January for Laker Company using the four inventory methods**: - Specific Identification - Weighted Average - FIFO (First-In, First-Out) - LIFO (Last-In, First-Out) 2. **Determine which method yields the highest gross profit.** 3. **Assess whether the gross profit using the weighted average method falls between that of using FIFO and LIFO.** 4. **Analyze the scenario where costs are rising instead of falling, and identify which method would yield the highest gross profit.** ### Calculation Guidelines Complete this analysis by entering your answers in the designated tabs. #### Data Table: Gross Profit Computation - **Sales**: To be computed for each method. - **Cost of Goods Sold (COGS)**: To be computed for each method. - **Gross Profit**: Calculate for each method using the formula: \[ \text{Gross Profit} = \text{Sales} - \text{Cost of Goods Sold} \] **Note**: Round cost per unit to two decimal places and final answers to the nearest whole dollars. --- This exercise will help you understand the impact of different inventory valuation methods on gross profit, vital for strategic financial planning and analysis.
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