Question

The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018: Cash Beginning inventory Connon stock Retained earnings $80,180 33,888 (228 units @ $158) 50,eee 63,180 The following five transactions occurred in 2018: 1. First purchase (cash) 150 units @ $155 2. Second purchase (cash) 160 units @ $160 3. Sales (all cash) 410 units @ $320 4. Paid $38.000 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 2018 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. Req A Req B1 Req B2 Req B3 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. FIFO LIFO Weighted Average Cost of goods sold Ending inventory < ReqA Req B1 >

Answer 1

Requirement (a) Requirement (6) Cost of goods sold Ending Inventory FIFO LIFO Weighted Average $62,650 $ 63,850 $ 63,318 $19,200 $ 18,000 $ 18,532 Sales Cost of goods sold Gross profit Salaries expense Income before tax Tax expense @25% Net Income Walls China shop Income Statement For the year Ended December 31, 2018 FIFO LIFO Weighted Average $131,200 $131,200 $ 131,200 $ 62,650 $ 63,850 $ 63,318 $ 68,550 $ 67,350 $ 67,882 $ 38,000 $ 38,000 $ 38,000 $ 30,550 $ 29,350 $ 29,882 $ 7,638 $ 7,338 $ 7,471 $ 22,913 $ 22,013 $ 22,412 Units Working Note: FIFO Method : Activity Beg Inventory 1st Purchase 2nd Purchase Cost of goods available for sale Less : Cost of goods sold @ 410 units 220 Units @ $150 150 units @ 155 40 units @ 160 Unit cost Total Cost 220 $ 150 $ 33,000 150 $ 155 $ 23,250 160 $ 25,600 $ 81,850 160 $ $ $ $ 33,000 23,250 6,400 $ S Walls China shop Balance Sheets As of December 31, 2018 FIFO LIFO Weighted Average 62,650 19,200 Ending Inventory Assets Cash Inventory $116,813 $117,113 $ $ 19,200 $ 18,000 $ 116,979 18,532 Units $ 136,013 $135,113 $ 135,512 LIFO Method: Activity Beg Inventory 1st Purchase 2nd Purchase Cost of goods available for sale Less : Cost of goods sold @ 410 units 160 units @ 160 150 unit @ 155 100 units @ 150 Total Assets Stockholders Equity Common stock Retained earnings Unit cost Total Cost 220 $ 150 $ 33,000 150 $ 155 $ 23,250 160 $ 160 $ 25,600 $ 81,850 $ 50,000 $ 50,000 $ $ 86,013 $ 85,113 $ 50,000 85,512 Total stockholders equity $ 136,013 $135,113 $ 135,512 $ $ $ Cash = Beginning + Sales - Purchases - Salaries - Tax 25,600 23,250 15,000 $ $ 63,850 18,000 Ending Inventory Units Weighted Avg Method : Activity Beg Inventory 1st Purchase 2nd Purchase Cost of goods available for sale Weighted Avg cost per unit Cost of goods sold @ 410 units Ending inventory Unit cost Total Cost 220 $ 150 $ 33,000 150 $ 155 $ 23,250 160 $ 160 $ 25,600 530 $ 81,850 $ 154.43 $ 63,318 $ 18,532 Walls China shop Statement of cash flows For the year Ended December 31, 2018 FIFO LIFO Weighted Average Cash flow from operating activities : Cash receipts from customers $131,200 $131,200 $ 131,200 Cash paid to supplier $ (48,850) $ (48,850) $ (48,850) Cash paid to employees $ (38,000) $ (38,000) $ (38,000) Cash paid to income tax expense $ (7,638) $ (7,338) $ (7,471) Net cash flow from operating activities $ 36,713 $ 37,013 $ 36,879 - Cash flow from investing activities Cash flow from financing activities Net change in cash Beginning cash Balance Ending cash Balance $ $ $ $ $ $ $ 36,713 $ 37,013 $ $ 80,100 $ 80,100 $ $ 116,813 $117,113 $ 36,879 80,100 116,979 Note : Please comment down for any further clarifications