Compute the income tax expense for each method

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Reference no: EM132490035

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

Question 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.

Question 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.)

Reference no: EM132490035

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