Financial Accounting

• Inventory example

1/1 Inventory 200 units @ $1=$200

3/1 Purchases 300 units @$1.20

11/1 Purchases 800 units @$1.50

10/1 Sold 100 units

12/1 Sold 1,100 units

• Periodic - Weighted Average

Beginning Inventory 200 x $1 = $ 200

Purchases

300 x $1.20 = $ 360

800 x $1.50 = $ 1200

Available for sale 1,300 = $1,760

Weighted average cost = $1,760/1,300 = $1.353846 per unit

Units in ending inventory = 200+300+800 - 100- 1,100 = 100 units

Cost of ending inventory = $1.353846 x 100 = $135

Cost of goods sold = $1,760-$135 =$1,625

• Periodic - FIFO

Cost of ending inventory = 100 units x $1.50 (= most recent purchase rate)

= $150

Cost of goods sold = $1,760-$150 = $1,610

• Periodic - LIFO

Cost of ending inventory = 100 units x $1.00 (beginning inventory unit cost)

= $100

Cost of goods sold = $1,760-$100 = $1,660

• Perpetual - Moving Average

Date Purchased Sold (Cost) Inventory

1/1 200 x $1 = $200

3/1 300 x $1.20=$360 200 x $1 = $200

300 x $1.20= $360

500 x $1.12a $560

10/1 100 x $1.12=$112 400 x $1.12 = $448

11/1 800 x $1.50=$1200 400 x $1.12= $ 448

800 x $1.50= $ 1200

1,200 x $1.37b=$1,648

12/1 1,100 x $1.37=$1,511 100 x $1.37 = $137

a $560/500 = $1.12 per unit

b $1,648/1,200 = $1.3733 per unit

Cost of goods sold = $112 +$1,511 = $1,623

Verify that Cost of goods sold + Ending Inventory = $1,623 + $137 = $1,760

= Beginning Inventory + Purchases

• Perpetual - FIFO

Date Purchased Sold (cost) Inventory

1/1 200 x $1 = $200

3/1 300 x $1.20=$360 200 x $1 = $200

300 x $1.20= $360

$560

10/1 100 x $1=$100 100 x $1 = $100

300 x $1.20= $360

$460

11/1 800 x $1.50=$1200 100 x $1 = $100

300 x $1.20= $450

800 x $1.50= $ 1200

$1,750

12/1 100 x $1 = $100

300 x $1.20 = $ 360

700...