Question

The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018 Cash $ 17,800 Beginning inventory 18,245 (205 units @ $89) Common stock 14,800 Retained earnings 21,245 The following five transactions occurred in 2018: First purchase (cash) 120 units @ $91 Second purchase (cash) 200 units @ $99 Sales (all cash) 355 units @ $196 Paid $16,900 cash for salaries expense Paid cash for income tax at the rate of 25 percent of income before taxes Required 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. Use a vertical model to show the 2018 income statement, the 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.)

Answer 1