The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash Beginning inventory Common stock Retained earnings $17,000 18,700 (220 units @ $85) 15,200 20,500 The following five transactions occurred in Year 2: 1. First purchase (cash) 125 units @ $87 2. Second purchase (cash) 205 units @ $95 3. Sales (all cash) 375 units @ $200 4. Paid $14,750 cash for salaries expense 5. 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. b. Use a vertical model to show the Year 2 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.) Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Use a vertical model to show the Year 2 income statement under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.) WALL'S CHINA SHOP Income Statements For the Year Ended December 31, Year 2 FIFO LIFO Weighted Average Sales Cost of goods sold Gross margin Salaries expense Income before tax 0 0 0 Income tax expenses Net income < Req A Req B2 >
The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2: Cash Beginning inventory Common stock Retained earnings $17,000 18,700 (220 units @ $85) 15,200 20,500 The following five transactions occurred in Year 2: 1. First purchase (cash) 125 units @ $87 2. Second purchase (cash) 205 units @ $95 3. Sales (all cash) 375 units @ $200 4. Paid $14,750 cash for salaries expense 5. 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. b. Use a vertical model to show the Year 2 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.) Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Use a vertical model to show the Year 2 income statement under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your answers to nearest whole dollar amount.) WALL'S CHINA SHOP Income Statements For the Year Ended December 31, Year 2 FIFO LIFO Weighted Average Sales Cost of goods sold Gross margin Salaries expense Income before tax 0 0 0 Income tax expenses Net income < Req A Req B2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2:
Cash
Beginning inventory
Common stock
Retained earnings
$17,000
18,700 (220 units @ $85)
15,200
20,500
The following five transactions occurred in Year 2:
1. First purchase (cash) 125 units @ $87
2. Second purchase (cash) 205 units @ $95
3. Sales (all cash) 375 units @ $200
4. Paid $14,750 cash for salaries expense
5. 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.
b. Use a vertical model to show the Year 2 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.)
Complete this question by entering your answers in the tabs below.
Req A
Req B1
Req B2
Req B3
Use a vertical model to show the Year 2 income statement under FIFO, LIFO, and weighted average. (Do not round
intermediate calculations. Round your answers to nearest whole dollar amount.)
WALL'S CHINA SHOP
Income Statements
For the Year Ended December 31, Year 2
Sales
Cost of goods sold
Gross margin
Salaries expense
FIFO
LIFO
Weighted
Average
Income before tax
0
0
0
Income tax expenses
Net income
< Req A
Req B2
>
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