Problem 5-19A (Algo) Effect of different inventory cost flow methods on financial statements LO 5-1

The accounting records of Walls China Shop reflected the following balances as of January 1, Year 3:

Cash $ 18,700

Beginning inventory 19,530 (210 @ $93)

Common stock 14,900

Retained earnings 23,330

The following five transactions occurred in Year 3:

First purchase (cash): 120 units @ $95

Second purchase (cash): 200 units @ $103

Sales (all cash): 360 units @ $193

Paid $15,850 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.)