In: Accounting
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:
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. Use a vertical model to show the Year 3 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.)
Use a vertical model to prepare the Year 3 income statement under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.)
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. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.)
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Use a vertical model to prepare the Year 3 balance sheet under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.)
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Use a vertical model to prepare the Year 3 statement of cash flows under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount. Amounts to be deducted should be indicated with a minus sign.)
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FIFO | Cost of Goods Available for sale | ||
Activity | Units | Unit Price | Amount |
Beginning Inventory | 205 | $ 89.00 | $ 18,245 |
Purchases | |||
First | 120 | $ 91.00 | $ 10,920 |
Second | 200 | $ 99.00 | $ 19,800 |
Total | 525 | $ 48,965 |
1.
FIFO | LIFO | W. Avg | |
Cost of Goods Sold | $ 32,135 | $ 33,835 | $ 33,109 |
Ending Inventory | $ 16,830 | $ 15,130 | $ 15,856 |
Ending Inventory
FIFO = 170 x $99 = $16830
LIFO = 170 x $89 = $15130
W. Avg = 170 x $93.27 = $15856
2.
Income Statement | |||
FIFO | LIFO | W. Avg | |
Sales Revenue | $ 66,030 | $ 66,030 | $ 66,030 |
Cost of Goods Sold | $ 32,135 | $ 33,835 | $ 33,109 |
Gross Profit | $ 33,895 | $ 32,195 | $ 32,921 |
Salaries Expense | $ 15,750 | $ 15,750 | $ 15,750 |
Income before tax | $ 18,145 | $ 16,445 | $ 17,171 |
Income tax expense | $ 4,536 | $ 4,111 | $ 4,293 |
Net Income | $ 13,609 | $ 12,334 | $ 12,878 |
3.
Balance Sheet | |||
FIFO | LIFO | W. Avg | |
Assets | |||
Cash | $ 34,024 | $ 34,449 | $ 34,267 |
Inventory | $ 16,830 | $ 15,130 | $ 15,856 |
Total Assets | $ 50,854 | $ 49,579 | $ 50,123 |
Stockholders Equity | |||
Common Stock | $ 14,600 | $ 14,600 | $ 14,600 |
Retained Earnings | $ 36,254 | $ 34,979 | $ 35,523 |
Total Stockholders Equity | $ 50,854 | $ 49,579 | $ 50,123 |
4.
Cash Flow Statement | |||
FIFO | LIFO | W. Avg | |
Cash Flow from Operating Activities | |||
Net Income | $ 13,609 | $ 12,334 | $ 12,878 |
Decrease in Inventory | $ 1,415 | $ 3,115 | $ 2,389 |
Net Cash Flows from operating activities | $ 15,024 | $ 15,449 | $ 15,267 |
Cash flows from investing activities | $ - | $ - | $ - |
Cash flows from financing activities | $ - | $ - | $ - |
Net Change in cash | $ 15,024 | $ 15,449 | $ 15,267 |
Beginning Cash balance | $ 19,000 | $ 19,000 | $ 19,000 |
Ending Cash balance | $ 34,024 | $ 34,449 | $ 34,267 |
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