The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2. $ 16,100 12,615 (145 units @ $87) 15,900 12,815 Cash Beginning inventory Common stock Retained earnings The following five transactions occurred in Year 2: 1. First purchase (cash): 120 units @ $89 2. Second purchase (cash): 200 units @ $97 3. Sales (all cash): 425 units @ $193 4. Paid $14,200 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. FIF 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.

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.
$ 16,100
12,615 (145 units @ $87)
15,900
12,815
Cash
Beginning inventory
Common stock
Retained earnings
The following five transactions occurred in Year 2:
1. First purchase (cash): 120 units @ $89
2. Second purchase (cash): 200 units @ $97
3. Sales (all cash): 425 units @ $193
4. Paid $14,200 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.
Transcribed Image Text:The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2. $ 16,100 12,615 (145 units @ $87) 15,900 12,815 Cash Beginning inventory Common stock Retained earnings The following five transactions occurred in Year 2: 1. First purchase (cash): 120 units @ $89 2. Second purchase (cash): 200 units @ $97 3. Sales (all cash): 425 units @ $193 4. Paid $14,200 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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