Item 6

Problem 5-32A (Algo) Effect of different inventory cost flow methods on financial statements LO 5-6

The accounting records of Walls China Shop reflected the following balances as of January 1, Year 2:

Cash	$16,500
Beginning inventory	18,860	(205 units @ $92)
Common stock	15,400
Retained earnings	19,960

The following five transactions occurred in Year 2:

1. First purchase (cash) 115 units @ $94
2. Second purchase (cash) 195 units @ $102
3. Sales (all cash) 350 units @ $195
4. Paid $13,650 cash for salaries expense.
5. Paid cash for income tax at the rate of 25 percent of income before taxes.

Required

1. Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow.
2. Use a vertical model to show the Year 2 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. Note: 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 2
	FIFO	LIFO	Weighted Average
Salaries expense
Income before tax	0	0	0

WALL'S CHINA SHOP
Balance Sheets
As of December 31, Year 2
	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 2
	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