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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2.
 

Cash $ 19,100  
Beginning inventory 13,200 (150 units @ $88)
Common stock 14,300  
Retained earnings 18,000  

 
The following five transactions occurred in Year 2:

  1. First purchase (cash): 115 units @ $90
  2. Second purchase (cash): 200 units @ $98
  3. Sales (all cash): 415 units @ $197
  4. Paid $13,350 cash for salaries expenses
  5. Paid cash for income tax at the rate of 40 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. Record the above transactions in general journal form and post to T-accounts assuming each of the cost flows listed. Assume perpetual inventory system is used.
1. FIFO
2. LIFO
3. Weighted Average
c. Use a vertical model to show the Year 2 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.

Reg B1 General
EReg B2 General
Req B2 T
Req B3 General
Journal
Req B1 T
Req B3 T
Req A
Req C
Journal
Accounts
Journal
Acccounts
Accounts
Record the Year 2 transactions in T-accounts assuming FIFO cost flow. Assume perpetual inventory system is used. (Round intermediate
calculations to 3 decimal places. Round your final answers to the nearest whole dollar amount.)
Cash
Merchandise Inventory
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Common Stock
Retained Earnings
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Sales Revenue
Cost of Goods Sold
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Salaries Expense
Income Tax Expense
Beg. Bal
Beg. Bal
End. Bal
End. Bal
< Req B1 General Journal
Req B2 General Journal >
Transcribed Image Text:Reg B1 General EReg B2 General Req B2 T Req B3 General Journal Req B1 T Req B3 T Req A Req C Journal Accounts Journal Acccounts Accounts Record the Year 2 transactions in T-accounts assuming FIFO cost flow. Assume perpetual inventory system is used. (Round intermediate calculations to 3 decimal places. Round your final answers to the nearest whole dollar amount.) Cash Merchandise Inventory Beg. Bal Beg. Bal End. Bal End. Bal Common Stock Retained Earnings Beg. Bal Beg. Bal End. Bal End. Bal Sales Revenue Cost of Goods Sold Beg. Bal Beg. Bal End. Bal End. Bal Salaries Expense Income Tax Expense Beg. Bal Beg. Bal End. Bal End. Bal < Req B1 General Journal Req B2 General Journal >
Req B1 T
Req B2 General
Reg B2 T
Req B3 T
Reg A
Reg B1 General
Journal
Req B3 General
Journal
Req C
Accounts
Journal
Acccounts
Accounts
Record the Year 2 transactions in T-accounts assuming LIFO cost flow. ASsume perpetual inventory system is used. (Round intermediate
calculations to 3 decimal places. Round your final answers to the nearest whole dollar amount.)
Cash
Merchandise Inventory
|Вeg. Bal
|Beg. Bal
End. Bal
End. Bal
Common Stock
Retained Earnings
Beg. Bal
Beg. Bal
End. Bal
End, Bal
Sales Revenue
Cost of Goods Sold
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Salaries Expense
Income Tax Expense
Beg. Bal
Beg. Bal
End. Bal
End. Bal
< Req B2 General Journal
Req B3 General Journal >
Transcribed Image Text:Req B1 T Req B2 General Reg B2 T Req B3 T Reg A Reg B1 General Journal Req B3 General Journal Req C Accounts Journal Acccounts Accounts Record the Year 2 transactions in T-accounts assuming LIFO cost flow. ASsume perpetual inventory system is used. (Round intermediate calculations to 3 decimal places. Round your final answers to the nearest whole dollar amount.) Cash Merchandise Inventory |Вeg. Bal |Beg. Bal End. Bal End. Bal Common Stock Retained Earnings Beg. Bal Beg. Bal End. Bal End, Bal Sales Revenue Cost of Goods Sold Beg. Bal Beg. Bal End. Bal End. Bal Salaries Expense Income Tax Expense Beg. Bal Beg. Bal End. Bal End. Bal < Req B2 General Journal Req B3 General Journal >
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