Question

The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 3: Cash Beginning inventory Common stock Retained earnings $19,000 19,320 (210 14,300 24,020 $92) The following five transactions occurred in Year 3: 1. First purchase (cash): 125 units @ $94 2. Second purchase (cash): 195 units @ $102 3. Sales (all cash): 365 units @ $185 4. Paid $15.400 cash for salaries expense 5. Pald cash for income tax at the rate of 25 percent of income before taxes Required a. Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow. (2) LIFO cost flow, and (3) weighted-average cost flow. Compute the income tax expense for each method. b. Use a vertical model to show the Year 3 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.) Complete this question by entering your answers in the tabs below. Required A Required : Required B2 Required B3 Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) UFO cost flow, and (3) weighted- average cost now. Compute the income tax expense for each method. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.) FIFO LIFO Weighted Average Cost of goods sold Ending inventory

Answer 1

FIFO method satce Purchase Cost of goods Sold unit Post Total Loty COS unit eos Toral Cost Janl. Balance ory unit I Toral COSH Cost 210 $92 $19,320 210 $92 $19,320 125 $94 1 $11,750 $94 $11,750 Year 3 / 125 3195 $102 $19.890 Year3195 210 125 195 $ 92 $19,3201 $94 $11.750) 165 $ 102 $ 3,060 $ 92 $94 $102 $ 19,320 $11.750 $ 19,890 Year 3 - 21 125 30 $102 $ 16,830 COS COGS=$34.130 LIFO Method Date Purchase T Cost of goods sol Balance unit I Total unit COSI COSI- Total Unit Gry 1 Cost Total Cost Jan! 210 $929 19,320 Year 3 125 $94 $11,750 210 $92 $ 19,320 125 $94 $11,750 Yean3 195 $102 519890 210 $ 92 $19.320 125 $94 $11,750 195 T $ 102 $19.890 Year 3 195 $ 102 $ 19.890 T25 $94 $11.750 45 092 $ 4140 165 $92 $ 15,180 Costos goods sold = $35780

Date Weighted Purchase Oty unit Cost- Total average method | Cost of goods sold oty unit Total Balance Unit Total I cost cost- cost cost Jand 210 $92 $ 19,320 335 $92.75 $31,070 Year3 125 $94 $11,750 Year3 195 $102 $19,890 530 $96.15 $50,960 $96.45 $35,095 165 $96.15 $15,865 Year3 365 Cost Of goods Sod = $ 35,095

Walls China Shop Income Statements Fon the rear ended December 31, Year 3 particulars FIFO LIFO WEIGHTED AVERAGE $ 67, 525 $ 67,525 Sales Revenue [ 365 * $185) LESS: COSE of goods Sold. $67.525 $ 35,095 $ 34,130 $ 35,780 GROSS Margin $ 33,395 $ 31,745 $ 32,430 LESS: $ 15,400 Salachices, expensus $ 15,400 $ 15,400 $ 17,995 $ 16,345 $ 17,0 30 Income before tax $4,499 LeSs: Income tax expenses (25%) $ 4,086 $ 4,258 Net income = $13,496 $12, 259 $12,772