The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2.

Cash	$ 19,000
Beginning inventory	13,795	(155 units @ $89)
Common stock	15,800
Retained earnings	16,995

The following five transactions occurred in Year 2:

1. First purchase (cash): 115 units @ $91

2. Second purchase (cash): 200 units @ $99

3. Sales (all cash): 420 units @ $191

4. Paid $16,200 cash for salaries expenses

5. Paid cash for income tax at the rate of 40 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. Record the above transactions in general journal form and post to T-accounts assuming each of the cost flows listed. Assume perpetual inventory system is used. 1. FIFO 2. LIFO 3. Weighted Average c. Use a vertical model to show the Year 2 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.

	Cost of Goods Sold	Ending Inventory
FIFO
LIFO
Weighted Average

Computation of Income Tax Expense/Net Income
	FIFO	LIFO	Weighted Average
Sales
Cost of goods sold
Gross margin
Salaries expense
Income before tax
Income tax expense
Net income

**Record the transactions in general journal form assuming FIFO cost flow. Assume perpetual inventory system is used**

No	Event	General Journal	Debit	Credit
1	01	Merchandise inventory
		Cash
2	02	Merchandise inventory
		Cash
3	3a	Cash
		Sales revenue
4	3b	Cost of goods sold
		Merchandise inventory
5	04	Salaries expense
		Cash
6	05	Income tax expense
		Cash

**Record the year 2 transactions in T-accounts assuming FIFO cost flow. Assume perpetual inventory system is used**

Cash
Beg. Bal
End. Bal

Common Stock
Beg. Bal
End. Bal

Sales Revenue
Beg. Bal
End Bal.

Salaries Expense
Beg Bal.
End Bal.

Merchandise Inventory
Beg. Bal
End. Bal

Retained Earnings
Beg. Bal
End. Bal

Cost of Goods Sold
Beg. Bal
End. Bal

Income Tax Expense
Beg. Bal
End. Bal