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Assignment# 2 Financial Accounting Topic# Inventory Valuation

This document provides an example calculation of cost of goods sold and ending inventory under FIFO, LIFO, and average costing methods. It includes inventory transactions for the year with purchases and sales. The costs of goods sold and ending inventories are calculated separately for each of the three inventory costing methods based on the periodic inventory system.

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Shaikh Munib
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99 views

Assignment# 2 Financial Accounting Topic# Inventory Valuation

This document provides an example calculation of cost of goods sold and ending inventory under FIFO, LIFO, and average costing methods. It includes inventory transactions for the year with purchases and sales. The costs of goods sold and ending inventories are calculated separately for each of the three inventory costing methods based on the periodic inventory system.

Uploaded by

Shaikh Munib
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment# 2

Financial Accounting
Topic# Inventory valuation

Question #1

The following are the transactions of kk steel at the year end 2010

Merchandise inventory ( opening ) 300 units @ 10 3000

12 jan Purchases 200 units @ 11 2200

2nd feb sales 400 units @ 15 6000

5 july purchase 300 units @ 11 3300

4 aug purchase 100 units @ 12 1200

30 oct sales 400 units @ 16 6400

Requirement :

1- Cost of good sold


2- Cost of ending inventory

Calculate the above by Fifo,Lifo& average methods under periodic inventory system.

Solution

Cost of good sold ( fifo )


Merchandise inventory ( opening ) 300 units @ 10 3000

12 jan Purchases 200 units @ 11 2200

5 july purchase 300 units @ 11 3300

800 units sold 8600 cost of good sold

Cost of ending inventory (fifo)


4 aug purchase 100 units @ 12 1200

Cost of good sold (Lifo)


4 aug purchase 100 units @ 12 1200

5july purchase 300 units @ 11 3300

12 jan Purchases 200 units @ 11 2200

Merchandise inventory ( opening ) 200 units @ 10 2000

800 units sold 8700 cost of good sold

Cost of ending inventory (Lifo)


Merchandise inventory ( opening ) 100 units @ 10 1000

Cost of good sold (Average)


Merchandise inventory ( opening ) 300 units @ 10 3000

12 jan Purchases 200 units @ 11 2200

5 july purchase 300 units @ 11 3300

4 aug purchase 100 units @ 12 1200

900 9700

Average formula average cost= total units cost/number of units

=9700/900

10.77 per unit avg cost

800 units sold x 10.77= 8616 cost of good sold

Cost of ending inventory (average)


Merchandise inventory ( opening ) 300 units @ 10 3000

12 jan Purchases 200 units @ 11 2200

5 july purchase 300 units @ 11 3300

4 aug purchase 100 units @ 12 1200


900 9700

Average formula average cost= total units cost/number of units

=9700/900

10.77 per unit avg cost

Ending inventory units 100 x 10.77=1077

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