the accounting records of Helen\'s Clock Shop reflected following balances as of

Question

the accounting records of Helen's Clock Shop reflected following balances as of January 1, 2011.

cash $50,800
beginning inventory 56,000 (200 units @ $280)
common stock 43,000
Retained earnings 63,800

the following five transactions occurred in 2011:

1. first purchase (cash) 120 units @ $300
2. second purchase (cash) 140 units @ $330
3. sales (all cash) 400 units @ $450
4. paid $ 30,000 cash for salaries expense.
5. paid cash for income tax at the rate of 25 percent of income before taxes.

1. fifo cost flow, 2. lifo cost flow, 3. weighted average

Explanation / Answer

1. fifo cost flow, 2. lifo cost flow, 3. weighted average beginning inventory (200 units @ $280) 56,000 first purchase (cash) 120 units @ $300 36,000 second purchase (cash) 140 units @ $330 46,200 Total 460 units 138,200 Average cost $300.44 Closing inventory 60 units FIFO method 60 units @ 330 $19,800 cost of goods sold $118,400 LIFO method 60 units @ 280 $16,800 cost of goods sold $121,400 AVERAGE method 60 units @ 300.44 $18,026 cost of goods sold $120,174 INCOME STATEMENT FIFO LIFO AVERAGE Sales 180,000 180,000 180,000 Less: cost of goods sold 118,400 121,400 120,174 Gross Margin 61,600 58,600 59,826 Less: Salaries 30,000 30,000 30,000 Operating Income 31,600 28,600 29,826 Less: 25% income tax 7,900 7150 7456.50 Net Income 23,700 21,450 22,369.50 ====== ====== ========

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