Question

The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year 3:

Cash	$	17,500
Beginning inventory		19,475		(205 @ $95)
Common stock		15,800
Retained earnings		21,175

The following five transactions occurred in Year 3:

1. First purchase (cash): 120 units @ $97
2. Second purchase (cash): 200 units @ $105
3. Sales (all cash): 355 units @ $185
4. Paid $14,600 cash for salaries expense
5. Paid cash for income tax at the rate of 25 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. 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.)

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.)

	FIFO LIFO Weighted Average Cost of goods sold Ending inventory

	WALL'S CHINA SHOP Income Statements For the Year Ended December 31, Year 3 FIFO LIFO Weighted Average Salaries expense Income before tax 0 0 0

	WALL'S CHINA SHOP Balance Sheets As of December 31, Year 3 FIFO LIFO Weighted Average Assets Total assets $0 $0 $0 Stockholders' equity Total stockholders' equity $0 $0 $0

	WALL'S CHINA SHOP Statements of Cash Flows For the Year Ended December 31, Year 3 FIFO LIFO Weighted Average Cash flows from operating activities Net cash flows from operating activities 0 0 0 Cash flows from investing activities Cash flows from financing activities Net change in cash 0 0 0 Ending cash balance $0 $0 $0

Answer 1