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
a. Compute the cost of goods sold and , assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. Compute the income tax expense for each method.
b. 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.)
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