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Inventory Valuation Example 1

Inventory Valuation Example 1

Date Transactions Beginning Inventory Purchase Sale (*1) Purchase Purchase Sale (*2) Sale (*3) Ending Inventory Total Units Purchased 700 100 500 600 200 400 100 Units Sold Unit Cost Inventory Units 700 800 300 900 1,100 700 600

May 1 May 3 May 8 May 15 May 19 May 25 May 27 May 31

$10 $12 ?? $14 $15 ?? ?? ??

1,600

1,000

FIFO, Perpetual Units (*1) 500 units sold 500 units from (*2) 400 units sold 200 units from 100 units from 100 units from (*3) 100 units sold 100 units from May 1 May 3 May 15 Beginning Inventory Purchase Purchase 200 100 100 $10 $12 $14 $2,000 $1,200 $1,400 $2,000 $1,200 $1,400 May 1 Beginning Inventory 500 $10 $5,000 $5,000 Unit Cost Purchases Cost of goods sold Ending inventory

May 15

Purchase

100

$14

$1,400

$1,400

Ending inventory

600 units 400 units from 200 units from

May 15 May 19

Purchase Purchase

400 200

$14 $15

$5,600 $3,000

$5,600 $3,000

FIFO, Perpetual

Total

1,600

$19,600

$11,000

$8,600

LIFO, Perpetual Units (*1) 500 units sold 100 units from 400 units from (*2) 400 units sold 200 units from 200 units from 100 units sold Page 1 of 4 May 3 May 1 Purchase Beginning Inventory 100 400 Unit Cost $12 $10 Purchases $1,200 $4,000 Cost of goods sold $1,200 $4,000 Ending inventory

May 19 May 15

Purchase Purchase

200 200

$15 $14

$3,000 $2,800

$3,000 $2,800

(*3)

Copyright © 1999-2009 by AccountingStudy.com.TM

Inventory Valuation Example 1 100 units from Ending inventory May 15 Purchase 100 $14 $1,400 $1,400

600 units 300 units from 300 units from May 1 May 15 Beginning Inventory Purchase 300 300 $10 $14 $3,000 $4,200 $3,000 $4,200

LIFO, Perpetual

Total

1,600

$19,600

$12,400

$7,200

FIFO, Periodic Units (*1) 500 units sold 500 units from (*2) 400 units sold 200 units from 100 units from 100 units from (*3) 100 units sold 100 units from May 1 May 3 May 15 Beginning Inventory Purchase Purchase 200 100 100 $10 $12 $14 $2,000 $1,200 $1,400 $2,000 $1,200 $1,400 May 1 Beginning Inventory 500 $10 $5,000 $5,000 Unit Cost Purchases Cost of goods sold Ending inventory

May 15

Purchase

100

$14

$1,400

$1,400

Ending inventory

600 units 400 units from 200 units from

May 15 May 19

Purchase Purchase

400 200

$14 $15

$5,600 $3,000

$5,600 $3,000

FIFO, Periodic

Total

1,600

$19,600

$11,000

$8,600

LIFO, Periodic Units (*1) 500 units sold 200 units from 300 units from 400 units sold 300 units from 100 units from 100 units sold 100 units from Ending inventory May 1 Beginning Inventory 100 $10 $1,000 $1,000 May 19 May 15 Purchase Purchase 200 300 Unit Cost $15 $14 Purchases $3,000 $4,200 Cost of goods sold $3,000 $4,200 Ending inventory

(*2)

May 15 May 3

Purchase Purchase

300 100

$14 $12

$4,200 $1,200

$4,200 $1,200

(*3)

600 units 600 units from May 1 Beginning Inventory 600 $10 $6,000 $6,000 Page 2 of 4

Copyright © 1999-2009 by AccountingStudy.com.TM

Inventory Valuation Example 1 LIFO, Periodic

Total

1,600

$19,600

$13,600

$6,000

Comparison FIFO LIFO FIFO LIFO Perpetual Perpetual Periodic Periodic $ $ $ $

Purchase 19,600 19,600 19,600 19,600

Cost of goods sold $ 11,000 $ 12,400 $ 11,000 $ 13,600

Ending inventory $ 8,600 $ 7,200 $ 8,600 $ 6,000

When prices go up

Old cost FIFO Old cost Recent cost FIFO 11,000 8,600 FIFO 11,000 8,600

<

Recent cost LIFO Recent cost Old cost LIFO $ 12,400 $ 7,200 LIFO $ 13,600 $ 6,000 Periodic $ 11,000 $ 8,600 Periodic $ 13,600 $ 6,000 Periodic Recent cost Old cost

Cost of goods sold Ending inventory Perpetual Cost of goods sold Ending inventory Periodic Cost of goods sold Ending inventory FIFO Cost of goods sold Ending inventory LIFO Cost of goods sold Ending inventory LIFO Cost of goods sold Ending inventory

< >

$ $

< >

$ $

< >

Perpetual $ 11,000 $ 8,600 Perpetual $ 12,400 $ 7,200 Perpetual Old cost Recent cost

= =

< >

< >

LIFO perpetual applies "Last-in First-out" during the period. LIFO periodic applies "Last-in First-out" at the end of period.

Moving average, Perpetual Date Transactions Units Purchased Units sold Unit Cost Inventory Units Purchases Cost of Ending Moving average unit goods sold inventory cost 10.00 10.25 10.25 12.75 13.16 13.16 13.16 13.16

May 1 May 3 May 8 May 15 May 19 May 25 May 27 May 31

Beginning Inventory Purchase Sale (*1) Purchase Purchase Sale (*2) Sale (*3)

700 100 500 600 200 400 100

$ $ $ $

10.00 12.00 ?? 14.00 15.00 ?? ?? ??

700 800 300 900 1,100 700 600 600

$ $ $ $

7,000 $ 1,200 $ $ 8,400 $ 3,000 $ $ $ $

$

5,125

$ $

5,264 1,316 $ 7,895

Copyright © 1999-2009 by AccountingStudy.com.TM

Page 3 of 4

Inventory Valuation Example 1 Total 1,600 1,000 $ 19,600 $ 11,705 $ 7,895

Weighted average, Periodic Date Transactions Units Purchased Units sold Unit Cost Inventory Units Purchases Cost of Ending Weighted average unit goods sold inventory cost $ $ $ $ $ $ $ $ 12.25 12.25 12.25 12.25 12.25 12.25 12.25 12.25 12.25

May 1 May 3 May 8 May 15 May 19 May 25 May 27 May 31

Beginning Inventory Purchase Sale (*1) Purchase Purchase Sale (*2) Sale (*3)

700 100 500 600 200 400 100

$ $ $ $

10.00 12.00 ?? 14.00 15.00 ?? ??

700 800 300 900 1,100 700 600 600

$ $ $ $

7,000 1,200 8,400 3,000

$

6,125

$ $

4,900 1,225 $ 7,350 7,350

Total

1,600

1,000

$

19,600

$ 12,250

$

Weighted average unit cost = (700x$10 + 100x$12 + 600x$14 + 200x$15) / (700+100+600+200)

Copyright © 1999-2009 by AccountingStudy.com.TM

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