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The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash $17,500 Beginning inventory Common stock 19,140
The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash $17,500 Beginning inventory Common stock 19,140 (220 units @ $87) 14,600 Retained earnings 22,040 The following five transactions occurred in Year 2: 1. First purchase (cash) 120 units @ $89 2. Second purchase (cash) 195 units @ $97 3. Sales (all cash) 370 units @ $189 4. Paid $16,900 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. b. 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.)
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