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The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018: Cash $ 80,100 Beginning inventory 33,000 (220 units @
The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018:
Cash $ 80,100 Beginning inventory 33,000 (220 units @ $150) Common stock 50,000 Retained earnings 63,100
The following five transactions occurred in 2018:
- First purchase (cash) 150 units @ $155
- Second purchase (cash) 160 units @ $160
- Sales (all cash) 410 units @ $320
- Paid $38,000 cash for salaries expense
- Paid cash for income tax at the rate of 25 percent of income before taxes
Required
- 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.
- Use a vertical model to show the 2018 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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