Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. Then, compute the income tax expense for each method. 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.) The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018:Cash$80,10033,000 (220 units @ $150)Beginning inventoryCommon stock50,000Retained earnings63,100The following five transactions occurred in 2018:1. First purchase (cash) 150 units @ $1552. Second purchase (cash) 160 units @ $1603. Sales (all cash) 410 units @ $3204. Paid $38,000 cash for salaries expense5. Paid cash for income tax at the rate of 25 percent of income before taxes

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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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Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. Then, compute the income tax expense for each method. 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.)

The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018:
Cash
$80,100
33,000 (220 units @ $150)
Beginning inventory
Common stock
50,000
Retained earnings
63,100
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. Paid cash for income tax at the rate of 25 percent of income before taxes

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