The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash $17,000 Beginning inventory 18,700 (220 units @ $85) Common stock 15,200 Retained earnings 20,500 The following five transactions occurred in Year 2: 1. First purchase (cash) 125 units @ $87 2. Second purchase (cash) 205 units @ $95 3. Sales (all cash) 375 units @ $200 4. Paid $14,750 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.)

The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash $17,000 Beginning inventory 18,700 (220 units @ $85) Common stock 15,200 Retained earnings 20,500 The following five transactions occurred in Year 2: 1. First purchase (cash) 125 units @ $87 2. Second purchase (cash) 205 units @ $95 3. Sales (all cash) 375 units @ $200 4. Paid $14,750 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.)

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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