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 $ 17,600 14,260 (155 units @ $92) 14,700 17,160 The following five transactions occurred in Year 2 1. First purchase (cash): 120 units @ $94 2. Second purchase (cash): 205 units @ $102 3. Sales (all cash): 425 units @ $197 4. Paid $15,000 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
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 $ 17,600 14,260 (155 units @ $92) 14,700 17,160 The following five transactions occurred in Year 2 1. First purchase (cash): 120 units @ $94 2. Second purchase (cash): 205 units @ $102 3. Sales (all cash): 425 units @ $197 4. Paid $15,000 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text: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
$ 17,600
14,260 (155 units @ $92)
14,700
17,160
The following five transactions occurred in Year 2
1. First purchase (cash): 120 units @ $94
2. Second purchase (cash): 205 units @ $102
3. Sales (all cash): 425 units @ $197
4. Paid $15,000 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
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