Reference no: EM132635520

Question - The accounting records of Wall's China Shop reflected the following balances as of January 1, 2018:

Cash $80,100

Beginning inventory 33,000 (220 units @ $150)

Common stock 50,000 Retained earnings 63,100

The following five transactions occurred in 2018:

1. First purchase (cash) 150 units @ $155

2. Second purchase (cash) 160 units @ $160

3. Sales (all cash) 410 units @ $320

4. Paid $38,000 cash for salaries expense

5. Paid cash for income tax at the rate of 25 percent of income before taxes

Required -

1. 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.

2. Use a vertical model to show the 2018 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.)