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The accounting records of Walls China Shop reflected the following balances as of January 1, Year 2: Cash $ 19,700 Beginning inventory 17,200 (200 units
The accounting records of Walls China Shop reflected the following balances as of January 1, Year 2:
Cash | $ | 19,700 | ||
Beginning inventory | 17,200 | (200 units @ $86) | ||
Common stock | 14,200 | |||
Retained earnings | 22,700 | |||
The following five transactions occurred in Year 2:
- First purchase (cash) 115 units @ $88
- Second purchase (cash) 195 units @ $96
- Sales (all cash) 345 units @ $196
- Paid $14,200 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.
- 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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