The accounting records of Walls China Shop reflected the following balances as of January 1,...

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Accounting

The accounting records of Walls China Shop reflected the following balances as of January 1, Year 3:

Cash $ 20,000

Beginning inventory 17,200 (200 @ $86)

Common stock 14,500

Retained earnings 22,700

The following five transactions occurred in Year 3:

First purchase (cash): 115 units @ $88

Second purchase (cash): 195 units @ $96

Sales (all cash): 345 units @ $187

Paid $14,700 cash for salaries expense

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

Cash	$ 20,000
Beginning inventory	17,200	(200 @ $86)
Common stock	14,500
Retained earnings	22,700

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.

b-1. Use a vertical model to show the Year 3 income statement under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.)

b-2. Use a vertical model to show the Year 3 balance sheet under FIFO, LIFO, and weighted average. (Hint: Record the events under an accounting equation before preparing the statements.)

b-3. Use a vertical model to show the Year 3 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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