Question
The accounting records of Walls China Shop reflected the following balances as of January 1, Year 2: Cash $ 17,500 Beginning inventory 18,200 (200 units
The accounting records of Walls China Shop reflected the following balances as of January 1, Year 2:
Cash | $ | 17,500 | ||
Beginning inventory | 18,200 | (200 units @ $91) | ||
Common stock | 14,200 | |||
Retained earnings | 21,500 | |||
The following five transactions occurred in Year 2:
First purchase (cash) 120 units @ $93
Second purchase (cash) 195 units @ $101
Sales (all cash) 350 units @ $188
Paid $14,200 cash for salaries expense
Paid cash for income tax at the rate of 25 percent of income before taxes
Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow.
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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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 |
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