The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 3: $ 16,600 Cash Beginning inventory Common stock Retained earnings. The following five transactions occurred in Year 3: 1. First purchase (cash): 120 units @ $96 2. Second purchase (cash): 205 units @ $104 3. Sales (all cash): 355 units @ $190 4. Paid $14,950 cash for salaries expense 5. Paid cash for income tax at the rate of 25 percent of income before taxes 19,270 (205 @ $94) 14,300 21,570 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.)
The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 3: $ 16,600 Cash Beginning inventory Common stock Retained earnings. The following five transactions occurred in Year 3: 1. First purchase (cash): 120 units @ $96 2. Second purchase (cash): 205 units @ $104 3. Sales (all cash): 355 units @ $190 4. Paid $14,950 cash for salaries expense 5. Paid cash for income tax at the rate of 25 percent of income before taxes 19,270 (205 @ $94) 14,300 21,570 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.)
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...
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