The accounting records of Walls China Shop reflected the following balances as of January 1,...
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Accounting
The accounting records of Walls China Shop reflected the following balances as of January 1, Year 3:
Cash
$ 20,000
Beginning inventory
17,200
(200 @ $86)
Common stock
14,500
Retained earnings
22,700
The following five transactions occurred in Year 3:
First purchase (cash): 115 units @ $88
Second purchase (cash): 195 units @ $96
Sales (all cash): 345 units @ $187
Paid $14,700 cash for salaries expense
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. Compute the income tax expense for each method.
b-1. Use a vertical model to show the Year 3 income statement under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.)
b-2. Use a vertical model to show the Year 3 balance sheet under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.)
b-3. Use a vertical model to show the Year 3 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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