The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 2.Cash$ 18,400 Beginning inventory14,720(160 units @ $92)Common stock16,000 Retained earnings17,120 The following five transactions occurred in Year 2:First purchase (cash): 120 units @ $94Second purchase (cash): 200 units @ $102Sales (all cash): 425 units @ $200Paid $15,450 cash for salaries expensesPaid cash for income tax at the rate of 40 percent of income before taxesRequireda. 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. FIFO2. LIFO

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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
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

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