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. b. Use a vertical model to show the Year 2 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.)

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. b. Use a vertical model to show the Year 2 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2:
Cash
Beginning inventory
Common stock
Retained earnings
$18,200
19,320 (210 units @ $92)
14,200
23,320
The following five transactions occurred in Year 2:
1. First purchase (cash) 115 units @ $94
2. Second purchase (cash) 200 units @ $102
3. Sales (all cash) 355 units @ $187
4. Paid $13,600 cash for salaries expense
5. 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.
b. Use a vertical model to show the Year 2 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. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.)
Cost of goods sold
Ending inventory
FIFO
LIFO
Weighted
Average
< Req A
Req B1 >

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Step 1: Introduction to inventory valuation methods :

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Step 2: Requirement A - computation of cost of goods sold and ending inventory :

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Step 3: Requirement A - Computation of cost of goods sold and ending inventory :

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Step 4: Requirement A - Computation of cost of goods sold and ending inventory :

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Step 5: Requirement B - Preparation of income statement :

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Step 6: Requirement B - Preparation of balance sheet :

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Step 7: Requirement B - Preparation of cash flow statement :

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