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The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year...

The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year 2:

Cash $

17,000

Beginning inventory 20,680 (220 units @ $94)
Common stock 15,800
Retained earnings

21,880

The following five transactions occurred in Year 2:

  1. First purchase (cash) 120 units @ $96
  2. Second purchase (cash) 200 units @ $104
  3. Sales (all cash) 370 units @ $190
  4. Paid $15,250 cash for salaries expense
  5. Paid cash for income tax at the rate of 25 percent of income before taxes

Required

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

1. FIFO -

FIFO Cost of Good Sold Units Rate Cost Purchase Rate Date Units Cost Units Jan 1 220 Balance Rate Cost $ 94 $ 20,680 $ 95 $ 3

2. LIFO -

LIFO Cost of Good Sold Units Rate Cost Purchase Rate Date Units Cost Units Jan 1 220 Balance Rate Cost $ 94 $ 20,680 $ 95 $ 3

3. Weighted Average Cost -

Purchase Weighted Average Cost Cost of Good Sold Units Rate Cost Date Units Rate Cost Units 220 Jan 1 Balance Rate Cost $ 94

4. Accounting Equation - FIFO -

Date Cash + Inventory Accounting Equation - FIFO Common Retained Stock Earnings $ 15,800 $ 21,880 + Revenue Expenses Net Inco

5. Accounting Equation - LIFO -

Date Cash + Inventory Accounting Equation - LIFO Common Retained Stock Earnings $ 15,800 $ 21,880 + Revenue Expenses = Net In

6. Accounting Equation - Weighted Average -

Date Cash + Inventory Accounting Equation - Weighted Average Common Retained Revenue Stock Earnings $ 15,800 $ 21,880 + Expen

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