Accounting Solution 7.1 (Accounting for Inventories)
3) The required table and financial statements are presented here:
| # | Assets | = | Claims (Equity) | Rev. | - | Exp. | = | Net Inc. |
Cash Flow |
|||||
| Cash | + | Inv. | = | Cont. Cap. |
+ | Ret. Earn. |
||||||||
| Bal. |
$6,500 |
+ |
$1,000 |
= |
$1,500 |
+ |
$6,000 |
$ 0 |
- |
$ 0 |
= |
$ 0 |
$ 0 |
|
| 1 |
(2,200) |
+ |
2,200 |
= |
n/a |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
(2,200) |
OA |
| 2 |
(3,900) |
+ |
3,900 |
= |
n/a |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
(3,900) |
OA |
| 3a |
11,200 |
+ |
n/a |
= |
n/a |
+ |
11,200 |
11,200 |
- |
n/a |
= |
11,200 |
11,200 |
OA |
| FIFO |
||||||||||||||
| 3b |
n/a |
+ |
(6,580) |
= |
n/a |
+ |
(6,580) |
n/a |
- |
6,580 |
= |
(6,580) |
n/a |
|
| 4 |
(1,200) |
+ |
n/a |
= |
n/a |
+ |
(1,200) |
n/a |
- |
1,200 |
= |
(1,200) |
(1,200) |
OA |
| 5 |
(684) |
+ |
n/a |
= |
n/a |
+ |
(684) |
n/a |
- |
684 |
= |
(684) |
(684) |
OA |
| Bal. |
$9,716 |
+ |
$520 |
= |
$1,500 |
+ |
$8,736 |
11,200 |
- |
8,464 |
= |
2,736 |
n/a |
|
| LIFO |
||||||||||||||
| 3b |
n/a |
+ |
(6,700) |
= |
n/a |
+ |
(6,700) |
n/a |
- |
6,700 |
= |
(6,700) |
n/a |
|
| 4 |
(1,200) |
+ |
n/a |
= |
n/a |
+ |
(1,200) |
n/a |
- |
1,200 |
= |
(1,200) |
(1,200) |
OA |
| 5 |
(660) |
+ |
n/a |
= |
n/a |
+ |
(660) |
n/a |
- |
660 |
= |
(660) |
(660) |
OA |
| Bal. |
$9,740 |
+ |
400 |
= |
$1,500 |
+ |
$8,640 |
11,200 |
- |
8,560 |
= |
2,640 |
n/a |
|
| Weighted-Average |
||||||||||||||
| 3b |
n/a |
+ |
(6,628) |
= |
n/a |
+ |
(6,628) |
n/a |
- |
6,628 |
= |
(6,628) |
n/a |
|
| 4 |
(1,200) |
+ |
n/a |
= |
n/a |
+ |
(1,200) |
n/a |
- |
1,200 |
= |
(1,200) |
(1,200) |
OA |
| 5 |
(674) |
+ |
n/a |
= |
n/a |
+ |
(674) |
n/a |
- |
674 |
= |
(674) |
(674) |
OA |
| Bal. |
$9,726 |
+ |
$472 |
= |
$1,500 |
+ |
$8,698 |
11,200 |
- |
8,502 |
= |
2,698 |
n/a |
|
Legend for the transactions in the table above:
1) First purchase of inventory;
2) Second purchase of inventory;
3a) Sales (revenue) recognition;
3b) Expense (cost of goods sold) recognition;
4) Selling and administrative expenses recognition;
5) Payment of income tax.
The financial statements under three different inventory costs:
| Income Statement |
|||
| FIFO |
LIFO |
Weighted- |
|
| Sales | $11,200 |
$11,200 |
$11,200 |
| Cost of Goods Sold | (6,580) |
(6,700) |
(6,628) |
| Gross Margin | 4,620 |
4,500 |
4,572 |
| Sell. & Admin. Expenses | (1,200) |
(1,200) |
(1,200) |
| Income before Taxes | 3,420 |
3,300 |
3,372 |
| Income Tax Expense | (684) |
(660) |
(674) |
| Net Income | $2,736 |
$2,640 |
$2,698 |
| Balance Sheet |
|||
| Assets Cash Inventory |
|
|
|
| Total Assets | $10,236 |
$10,140 |
$10,198 |
| Liabilities | $ 0 |
$ 0 |
$ 0 |
| Equity Contributed Capital Retained Earnings |
|
|
|
| Total Equity | $10,236 |
$10,140 |
$10,198 |
|
|
|||
| Statement of Cash Flows |
|||
| Operating Activities Cash Inflow from Sales Cash Outflow for Inventory Cash Outflow for Sell. Exp. Cash Outflow for Tax |
|
|
|
| Net Cash Flow from Operating Activities |
|
|
|
| Investing Activities | $ 0 |
$ 0 |
$ 0 |
| Financing Activities | $ 0 |
$ 0 |
$ 0 |
| Net Increase in Cash | $3,216 |
$3,240 |
$3,226 |
| Beginning Cash Balance | $6,500 |
$6,500 |
$6,500 |
| Ending Cash Balance | $9,716 |
$9,740 |
$9,726 |
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