The accounting records of Octavias Flower Shop reflected the following balances as of January 1, Year 3:
Question:
The accounting records of Octavia’s Flower Shop reflected the following balances as of January 1, Year 3:
Cash ..............................................................$92,500
Beginning inventory ....................................36,000 (225 units @ $160)
Common stock .............................................60,000
Retained earnings ........................................68,500
The following five transactions occurred in Year 3:
1. First purchase (cash): 130 units @ $140
2. Second purchase (cash): 180 units @ $165
3. Sales (all cash): 380 units @ $335
4. Paid $42,000 cash for salaries expense
5. Paid cash for income tax at the rate of 30 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. Prepare the Year 3 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.)
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds