Question

The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year 3: Cash $19,700, Beginning inventory $18,200 (200 @ $91), Common stock $14,600, Retained earnings $23,300. The following five transactions occurred in Year 3: First purchase (cash): 120 units @ $93 Second purchase (cash): 200 units @ $101 Sales (all cash): 350 units @ $189 Paid $13,650 cash for salaries expense Paid 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.

Answer 1

oiged Auexag o Total LIFo 120 936o 120 les Saler1 20 11 350 95.3 3335 .30 | lol | 3030 | 30 | gj | 27h 1626 32390 31o10 33355 Sold CA- 506 use due to demol 520

616so 61650 61 bSo Le Sa 935 75

DATE b. FIFo Sales SDooit 6615o 189$ 6615o lost of 3Yo9o (33355 3239o 18410 19145 Rollo 5027.5 17 86 25 of Net 19358.25

s et Fixed Assdb aotangible A lurent Assets Cash ) 14700- ll60 Reo+ 66i5o-3o -57-52 358)2-536237 5 15 1ro si 303-5 3 6o53.795 62 5 52258 75 9700-116 o+66150-12 7 170 Total Assetet --一22982-5 rrent Liability ue Asse 52982.551707-9 51707 5 522 58 5 lommon S 1600 1960 Relain asrljap> 223001 23300 23300 113 58.75 5245170.5 52258.75

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