Problem - Effect of different inventory cost flow methods on financial statements The accounting records of Brooks Photography, Inc., reflected the following balances as of
January 1, 2012:
Cash $19,000
Beginning inventory 6,750 (75 units @ $90)
Common stock 7,500
Retained earnings 18,250
The following five transactions occurred in 2012.
1. First purchase (cash) 100 units @ $92
2. Second purchase (cash) 175 units @ $100
3. Sales (all cash) 300 units @ $170
4. Paid $15,000 cash for operating expenses.
5. Paid cash for income tax at the rate of 30 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.
b. Use a vertical model to prepare the 2012 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.)