Question

The accounting records of Allen Insulation, Inc., reflected the following balances as of January 1, 2016:
Cash ............ $36,000
Beginning inventory ..... 24,000 (200 units @ $120)
Common stock ......... 25,000
Retained earnings ....... 35,000
The following five transactions occurred in 2016:
1. First purchase (cash) 130 units @ $124
2. Second purchase (cash) 220 units @ $128
3. Sales (all cash) 350 units @ $320
4. Paid $24,000 cash for operating expenses.
5. Paid cash for income tax at the rate of 40 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 income tax expense for each method.
b. Record the above transactions in general journal form and post to T-accounts assuming
(1) FIFO cost flow,
(2) LIFO cost flow, and
(3) Weighted-average cost flow.
c. Use a vertical model to show the 2016 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.


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  • CreatedApril 20, 2015
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