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

Cash

Beginning inventory

Common stock

Retained earnings

$ 19,500

12,470 (145 units @ $86)

14,200

17,770

The following five transactions occurred in Year 2

1. First purchase (cash): 115 units @ $88
2. Second purchase (cash): 205 units @ $96
3. Sales (all cash): 425 units @ $199
4. Paid $16,150 cash for salaries expenses
5. Paid cash for income tax at the rate of 40 percent of income before taxes

Required

flow. Compute the income tax expense for each method.

1. Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow. (2) LIFO cost flow, and (3) weighted-average cost
2. 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. LFO
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.