The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2. Cash Beginning inventory. $ 18,500 13,920 (160 units @ $87) 15,600 Common stock Retained earnings The following five transactions occurred in Year 2: 1. First purchase (cash): 125 units $89 2. Second purchase (cash): 200 units @ $97 3. Sales (all cash): 425 units @ $197 4. Paid $15,250 cash for salaries expenses 16,820 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. $ 18,500 13,920 (160 units @ $87) 15,600 Common stock Retained earnings The following five transactions occurred in Year 2: 1. First purchase (cash): 125 units $89 2. Second purchase (cash): 200 units @ $97 3. Sales (all cash): 425 units @ $197 4. Paid $15,250 cash for salaries expenses 16,820 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.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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