The accounting records of Wall\'s China Shop reflected the following balances as
ID: 2423596 • Letter: T
Question
The accounting records of Wall's China Shop reflected the following balances as of January 1, 2016: Cash $80,100 Beginning inventory 33,000 (220 units @ $150) Common stock 50,000 Retained earnings 63,100 The following five transactions occurred in 2016: 1. First purchase (cash) 150 units @ $155 2. Second purchase (cash) 160 units @ $160 3. Sales (all cash) 410 units @ $320 4. Paid $38,000 cash for salaries expense. 5. Paid cash for income tax at the rate of 25 percent of income before taxes. Required a. Compute the cost of goods sold and ending inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. Compute the income tax expense for each method. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) b. Record the above transactions in general journal form and post to T-accounts assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3) weighted-average cost flow. Assume perpetual inventory system is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) 1. FIFO 2. LIFO 3. Weighted Average c. Use a vertical model to show the 2016 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. Amounts to be deducted and losses should be indicated with a minus sign.)
Explanation / Answer
b. Journal Entries
Partculars
Debit($)
Credit($)
Purchase A/C Dr.(150*155)
To Cash A/c
23250
23250
Purchase A/C Dr.(160*160)
To Cash A/c
25600
25600
Cash A/C Dr.
To Sales A/c(410*320)
131200
131200
Salary A/C Dr.
To cash A/c
38000
38000
Income Tax A/c Dr.
To cash A/c
7638/7338/7471
7638/7338/7471
Particluars
FIFO
LIFO`
Weighted Average
Opening Inventory(220*150)
33000
33000
33000
Purchases(23250+25600)
48850
48850
48850
Less : Cost of Goods Sold
(220*150+150*155+40*160)
62650
(160*160+150*155+100*150)
63850
(33000+23250+25600)/530*410
63316
Closing Inventory
19200
18000
18534
Sales
131200
131200
131200
Less: COGS
62650
63850
63316
Less: Salary
38000
38000
38000
Profit
30550
29350
29884
Tax@25%
7638
7338
7471
C
Income Statement
Particulars
FIFO
LIFO
Weighted Average
Sales
131200
131200
131200
Purchases
(48850)
(48850)
(48850)
Change In Inventory
(13800)
(15000)
(14466)
Salary
(38000)
(38000)
(38000)
Profit
30550
29350
29884
Income tax
7638
7338
7471
Profit transferred to Reserves
22912
22012
22413
Balance sheet
Particulars
FIFO
LIFO
Weighted Average
Common Stock
50000
50000
50000
Retained Earnings
86012
85112
85513
136012
135112
135513
Inventory
19200
18000
18534
Cash
116812
117112
116979
136012
135112
135513
Statement of Cashflow
Particulars
FIFO
LIFO
Weighted Average
Opening balance
80100
80100
80100
Inflow:-
Sales
131200
1312001
131200
Outflow:-
Purchases
48850
48850
48850
Salary
38000
38000
38000
TAx
7638
7338
7471
Partculars
Debit($)
Credit($)
Purchase A/C Dr.(150*155)
To Cash A/c
23250
23250
Purchase A/C Dr.(160*160)
To Cash A/c
25600
25600
Cash A/C Dr.
To Sales A/c(410*320)
131200
131200
Salary A/C Dr.
To cash A/c
38000
38000
Income Tax A/c Dr.
To cash A/c
7638/7338/7471
7638/7338/7471
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