Is cost of goods sold an asset 1 + HW2b Saved Help Save & E The accounting recor
ID: 2341760 • Letter: I
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Is cost of goods sold an asset 1 + HW2b Saved Help Save & E The accounting records of Wall's China Shop reflected the following balances as of January 1, Year 3 Cash $16,000 Deginning inventory 17,630 (205 unita $86) Common stock 15,700 17,930 Retained earnings eBook The following five transactions occurred in Year 3: Print 1. First purchase (cash): 125 unitse$88 2. Second purchase (cash): 200 units e $96 Reerences3 Sales (all cash): 360 units $192 4. Paid $14,050 cash for salaries expense 5. Paid cash for income tax at the rate of 25 percent of income before texes Required a. Compute the cost of goods sold and ending inventory, assuming () 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 Year 3 income statement, balance sheet, and statement of cash fiows 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.Explanation / Answer
a. Calculation of Cost of Goods Sold and Ending Inventory:
(1) FIFO Cost Flow:
Cost of goods sold (360 Units)
205 units @$86
$ 17,630.00
125 units @$88
$ 11,000.00
130 units @$96
$ 2,880.00
Cost of goods sold
$ 31,510.00
Ending Inventory (170 units)
170 units @$96
$ 16,320.00
(2) LIFO Cost Flow:
Cost of goods sold (360 Units)
200 units @$96
$ 19,200.00
125 units @$88
$ 11,000.00
35 units @$86
$ 3,010.00
Cost of goods sold
$ 33,210.00
Ending Inventory (170 units)
170 units @$86
$ 14,620.00
(3) Weighted Average Cost Flow:
Units
Total Cost
Beginign Inventory
$ 205.00
$ 17,630.00
First purchase
$ 125.00
$ 11,000.00
Second Purchase
$ 200.00
$ 19,200.00
Cost of Goods Available for Sale
$ 530.00
$ 47,830.00
Weighted Average Cost per unit = (47830/530)
$ 90.25
Cost of goods sold (360 Units*$90.2453)
$ 32,488.31
Ending Inventory (170 units*$90.2453)
$ 15,341.70
a. Calculation of Income Tax Expense for each Method:
FIFO
LIFO
Weighted Avg.
Sales (360 units * $192)
$ 69,120.00
$ 69,120.00
$ 69,120.00
Less: Cost of Good sold
$ (31,510.00)
$ (33,210.00)
$ (32,488.31)
Gross Profit
$ 37,610.00
$ 35,910.00
$ 36,631.69
Less: Salaries Expenses
$ (14,050.00)
$ (14,050.00)
$ (14,050.00)
Income Before Taxes (P)
$ 23,560.00
$ 21,860.00
$ 22,581.69
Income Tax Expense (P*25%)
$ 5,890.00
$ 5,465.00
$ 5,645.42
b (1). Income Statement
FIFO
LIFO
Weighted Avg.
Sales (360 units * $192)
$ 69,120.00
$ 69,120.00
$ 69,120.00
Less: Cost of Good sold
$ (31,510.00)
$ (33,210.00)
$ (32,488.31)
Gross Profit
$ 37,610.00
$ 35,910.00
$ 36,631.69
Less: Salaries Expenses
$ (14,050.00)
$ (14,050.00)
$ (14,050.00)
Income Before Taxes (P)
$ 23,560.00
$ 21,860.00
$ 22,581.69
Less: Income Tax Expense (P*25%)
$ (5,890.00)
$ (5,465.00)
$ (5,645.42)
Net Income
$ 17,670.00
$ 16,395.00
$ 16,936.27
b (2). Balance Sheet
FIFO
LIFO
Weighted Avg.
ASSTES:
Cash Balance (See Cash Flow Statement)
$ 34,980.00
$ 35,405.00
$ 35,224.58
Ending Inventory
$ 16,320.00
$ 14,620.00
$ 15,341.70
Total Assets
$ 51,300.00
$ 50,025.00
$ 50,566.28
LIABILITIES AND EQUITY:
Equity:
Common Stock
$ 15,700.00
$ 15,700.00
$ 15,700.00
Retained Earnings
$ 17,930.00
$ 17,930.00
$ 17,930.00
Net Income
$ 17,670.00
$ 16,395.00
$ 16,936.27
TOTAL LIABILITIES AND EQUITY
$ 51,300.00
$ 50,025.00
$ 50,566.27
b (3). Statement of Cash Flow :
Cash flow from Operating Activities:
Cash Sales (360 units * $192)
$ 69,120.00
$ 69,120.00
$ 69,120.00
Cash Purchases
$ (30,200.00)
$ (30,200.00)
$ (30,200.00)
Income Tax Payment
$ (5,890.00)
$ (5,465.00)
$ (5,645.42)
Salaries Expense Paid
$ (14,050.00)
$ (14,050.00)
$ (14,050.00)
Net Cash Flow
$ 18,980.00
$ 19,405.00
$ 19,224.58
Add: Beginning cash Balance
$ 16,000.00
$ 16,000.00
$ 16,000.00
Ending Cash Balance
$ 34,980.00
$ 35,405.00
$ 35,224.58
a. Calculation of Cost of Goods Sold and Ending Inventory:
(1) FIFO Cost Flow:
Cost of goods sold (360 Units)
205 units @$86
$ 17,630.00
125 units @$88
$ 11,000.00
130 units @$96
$ 2,880.00
Cost of goods sold
$ 31,510.00
Ending Inventory (170 units)
170 units @$96
$ 16,320.00
(2) LIFO Cost Flow:
Cost of goods sold (360 Units)
200 units @$96
$ 19,200.00
125 units @$88
$ 11,000.00
35 units @$86
$ 3,010.00
Cost of goods sold
$ 33,210.00
Ending Inventory (170 units)
170 units @$86
$ 14,620.00
(3) Weighted Average Cost Flow:
Units
Total Cost
Beginign Inventory
$ 205.00
$ 17,630.00
First purchase
$ 125.00
$ 11,000.00
Second Purchase
$ 200.00
$ 19,200.00
Cost of Goods Available for Sale
$ 530.00
$ 47,830.00
Weighted Average Cost per unit = (47830/530)
$ 90.25
Cost of goods sold (360 Units*$90.2453)
$ 32,488.31
Ending Inventory (170 units*$90.2453)
$ 15,341.70
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