Question
In: Accounting
The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018:...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018:
| Cash | $ |
17,700 |
||
| Beginning inventory | 19,110 | (210 units @ $91) | ||
| Common stock | 15,500 | |||
| Retained earnings |
21,310 |
|||
The following five transactions occurred in 2018:
- First purchase (cash) 120 units @ $93
- Second purchase (cash) 195 units @ $101
- Sales (all cash) 360 units @ $192
- Paid $14,450 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, 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.)
Solutions
Expert Solution
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| Wall's China | |||
| FIFO | Units | Rate | Amount $ |
| Total units sold | 360.00 | ||
| Units sold from beginning inventory | 210.00 | 91.00 | 19,110.00 |
| Units sold from First purchase | 120.00 | 93.00 | 11,160.00 |
| Units sold from Second purchase | 30.00 | 101.00 | 3,030.00 |
| Cost of goods sold- FIFO | 33,300.00 | ||
| Ending Inventory - FIFO | |||
| Second purchase | 195.00 | ||
| Units sold from Second purchase | 30.00 | ||
| Ending Inventory - FIFO | 165.00 | 101.00 | 16,665.00 |
| LIFO | Units | Rate | Amount $ |
| Total units sold | 360.00 | ||
| Units sold from Second purchase | 195.00 | 101.00 | 19,695.00 |
| Units sold from First purchase | 120.00 | 93.00 | 11,160.00 |
| Units sold from beginning inventory | 45.00 | 91.00 | 4,095.00 |
| Cost of goods sold- LIFO | 34,950.00 | ||
| Ending Inventory - LIFO | |||
| Beginning inventory | 210.00 | ||
| Units sold from beginning inventory | 45.00 | ||
| Ending Inventory - LIFO | 165.00 | 91.00 | 15,015.00 |
| Weighted average cost per unit | Amount $ | ||
| Beginning inventory | 210.00 | 91.00 | 19,110.00 |
| First purchase | 120.00 | 93.00 | 11,160.00 |
| Second purchase | 195.00 | 101.00 | 19,695.00 |
| Total units available for sale | 525.00 | 49,965.00 | |
| Weighted average cost per unit | 95.17 | ||
| Total units sold | 360.00 | 34,262.00 | |
| Ending Inventory | 165.00 | 15,703.00 | |
| Answer A | FIFO | LIFO | Weighted average |
| Cost of goods sold | 33,300.00 | 34,950.00 | 34,262.00 |
| Ending Inventory | 16,665.00 | 15,015.00 | 15,703.00 |
| Sales units | 360.00 | ||
| Sell price per unit | 192.00 | ||
| Sales value | 69,120.00 | ||
| Answer B 1 | FIFO | LIFO | Weighted average |
| Sales value | 69,120.00 | 69,120.00 | 69,120.00 |
| Less: | |||
| Cost of goods sold | 33,300.00 | 34,950.00 | 34,262.00 |
| Salaries Expense | 14,450.00 | 14,450.00 | 14,450.00 |
| Income Before tax | 21,370.00 | 19,720.00 | 20,408.00 |
| Tax @ 25% | 5,342.50 | 4,930.00 | 5,102.00 |
| Income after tax | 16,027.50 | 14,790.00 | 15,306.00 |
| Statement of retained earnings | FIFO | LIFO | Weighted average |
| Opening Balance | 21,310.00 | 21,310.00 | 21,310.00 |
| Net Income for the year | 16,027.50 | 14,790.00 | 15,306.00 |
| Closing Balance | 37,337.50 | 36,100.00 | 36,616.00 |
| Calculation of cash balance | FIFO | LIFO | Weighted average |
| Opening Balance | 17,700.00 | 17,700.00 | 17,700.00 |
| Add: Cash Sales | 69,120.00 | 69,120.00 | 69,120.00 |
| Less: Cash Purchases | 30,855.00 | 30,855.00 | 30,855.00 |
| Less: Cash salaries | 14,450.00 | 14,450.00 | 14,450.00 |
| Less: Income tax | 5,342.50 | 4,930.00 | 5,102.00 |
| Closing Balance | 36,172.50 | 36,585.00 | 36,413.00 |
| Answer B 2 | |||
| Balance Sheet | FIFO | LIFO | Weighted average |
| Assets | |||
| Cash | 36,172.50 | 36,585.00 | 36,413.00 |
| Ending Inventory | 16,665.00 | 15,015.00 | 15,703.00 |
| Total assets | 52,837.50 | 51,600.00 | 52,116.00 |
| Stockholder's equity | FIFO | LIFO | Weighted average |
| Common Stock | 15,500.00 | 15,500.00 | 15,500.00 |
| Retained Earnings | 37,337.50 | 36,100.00 | 36,616.00 |
| Stock holder's equity | 52,837.50 | 51,600.00 | 52,116.00 |
| Answer B 3 |
 ekkarill92 answered 2 years agoRelated SolutionsThe accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018:...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, 2018: Cash $ 17,600 Beginning
inventory 18,200 (200 units @ $91) Common stock 15,400 Retained
earnings 20,400 The following five transactions occurred in 2018:
First purchase (cash) 120 units @ $93 Second purchase (cash) 200
units @ $101 Sales (all cash) 350 units @ $199 Paid $16,950 cash
for salaries expense Paid cash for income tax at the rate of 25
percent of income before...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018:...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, 2018: Cash $ 17,600 Beginning
inventory 18,400 (200 units @ $92) Common stock 14,500 Retained
earnings 21,500 The following five transactions occurred in 2018:
First purchase (cash) 125 units @ $94 Second purchase (cash) 195
units @ $102 Sales (all cash) 355 units @ $190 Paid $15,700 cash
for salaries expense Paid cash for income tax at the rate of 25
percent of income before...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 2:
Cash
$
19,700
Beginning inventory
17,200
(200 units @ $86)
Common stock
14,200
Retained earnings
22,700
The following five transactions occurred in Year 2:
First purchase (cash) 115 units @ $88
Second purchase (cash) 195 units @ $96
Sales (all cash) 345 units @ $196
Paid $14,200 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3:
Cash
$
18,500
Beginning inventory
17,800
(200 @ $89)
Common stock
14,400
Retained earnings
21,900
The following five transactions occurred in Year 3:
First purchase (cash): 120 units @ $91
Second purchase (cash): 200 units @ $99
Sales (all cash): 350 units @ $195
Paid $13,700 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of income...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3: Cash $ 17,600 Beginning
inventory 18,480 (210 @ $88) Common stock 14,400 Retained earnings
21,680 The following five transactions occurred in Year 3: First
purchase (cash): 120 units @ $90 Second purchase (cash): 200 units
@ $98 Sales (all cash): 360 units @ $198 Paid $16,650 cash for
salaries expense Paid cash for income tax at the rate of 25 percent
of income...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3:
Cash
$
17,700
Beginning inventory
20,680
(220 @ $94)
Common stock
14,700
Retained earnings
23,680
The following five transactions occurred in Year 3:
First purchase (cash): 125 units @ $96
Second purchase (cash): 195 units @ $104
Sales (all cash): 375 units @ $200
Paid $16,100 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of income...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 2:
Cash
$
18,900
Beginning inventory
19,135
(215 units @ $89)
Common stock
15,900
Retained earnings
22,135
The following five transactions occurred in Year 2:
First purchase (cash) 120 units @ $91
Second purchase (cash) 195 units @ $99
Sales (all cash) 365 units @ $191
Paid $15,200 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3:
Cash
$
19,000
Beginning inventory
18,245
(205 @ $89)
Common stock
14,600
Retained earnings
22,645
The following five transactions occurred in Year 3:
First purchase (cash): 120 units @ $91
Second purchase (cash): 200 units @ $99
Sales (all cash): 355 units @ $186
Paid $15,750 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of income...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3: Cash $ 19,900 Beginning
inventory 18,000 (200 @ $90) Common stock 15,000 Retained earnings
22,900 The following five transactions occurred in Year 3: First
purchase (cash): 120 units @ $92 Second purchase (cash): 200 units
@ $100 Sales (all cash): 350 units @ $190 Paid $13,950 cash for
salaries expense Paid cash for income tax at the rate of 25 percent
of income...
The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3:
Cash
$
19,800
Beginning inventory
19,270
(205 @ $94)
Common stock
14,400
Retained earnings
24,670
The following five transactions occurred in Year 3:
First purchase (cash): 115 units @ $96
Second purchase (cash): 200 units @ $104
Sales (all cash): 350 units @ $195
Paid $14,500 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of income...
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