13points

eBook

Print

References

Check my workCheck My Work button is now enabled3

Item 1

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

Cash	$ 18,600
Beginning inventory	14,415	(155 units @ $93)
Common stock	14,000
Retained earnings	19,015

The following five transactions occurred in Year 2:

First purchase (cash): 125 units @ $95

Second purchase (cash): 205 units @ $103

Sales (all cash): 430 units @ $196

Paid $15,950 cash for salaries expenses

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 the income tax expense for each method. b. Record the above transactions in general journal form and post to T-accounts assuming each of the cost flows listed. Assume perpetual inventory system is used. 1. FIFO 2. LIFO 3. Weighted Average c. Use a vertical model to show the Year 2 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.

REQ B2 AND B2T

1

Record first purchase of merchandise inventory for cash.

2

Record second purchase of merchandise inventory for cash.

3

Record sale of inventory for cash.

4

Record entry for cost of goods sold.

5

Record entry for salaries expenses paid.

6

Record entry for income tax expenses paid.

Record the Year 2 transactions in T-accounts assuming LIFO cost flow. Assume perpetual inventory system is used. (Round intermediate calculations to 3 decimal places. Round your final answers to the nearest whole dollar amount.)

Cash					Merchandise Inventory
Beg. Bal					Beg. Bal
					End. Bal
End. Bal
Common Stock					Retained Earnings
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Sales Revenue					Cost of Goods Sold
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Salaries Expense					Income Tax Expense
Beg. Bal					Beg. Bal
End. Bal					End. Bal