The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2. Cash $ 18,400 Beginning inventory 14,720 (160 units @ $92) Common stock 16,000 Retained earnings 17,120 The following five transactions occurred in Year 2: First purchase (cash): 120 units @ $94 Second purchase (cash): 200 units @ $102 Sales (all cash): 425 units @ $200 Paid $15,450 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
The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2. Cash $ 18,400 Beginning inventory 14,720 (160 units @ $92) Common stock 16,000 Retained earnings 17,120 The following five transactions occurred in Year 2: First purchase (cash): 120 units @ $94 Second purchase (cash): 200 units @ $102 Sales (all cash): 425 units @ $200 Paid $15,450 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
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter11: The Statement Of Cash Flows
Section: Chapter Questions
Problem 37E: Analyzing the Accounts Casey Company uses a perpetual inventory system and engaged in the following...
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The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2.
Cash | $ 18,400 | |
---|---|---|
Beginning inventory | 14,720 | (160 units @ $92) |
Common stock | 16,000 | |
17,120 |
The following five transactions occurred in Year 2:
- First purchase (cash): 120 units @ $94
- Second purchase (cash): 200 units @ $102
- Sales (all cash): 425 units @ $200
- Paid $15,450 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
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