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Periodic Inventory Valuation Methods

Periodic Inventory Valuation Methods

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Published by Mary
How to value ending inventory using FIFO, LIFO, or Weighted Average.
How to value ending inventory using FIFO, LIFO, or Weighted Average.

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Published by: Mary on Mar 24, 2011
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07/31/2013

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Periodic Inventory Valuation Methods
MJC Revised 12/2010 Page 1
Chart 1
Inventory-listing chart in the order items were purchased during the year.
Purchase DatesNumber of unitsCost perunitTotalextended cost
Beginning inventory(oldest material)
20 7 140
First purchase of the year
40 8 320
Second purchase
30 9 270
Third purchase
20 10 200
Fourth purchase(Newest Material)
30 11 330
Units Available for sale and Goods Available for Sale(Total of all purchases plus beginning inventory)
140 X $1,260
Less: Units Sold
80
Units in ending inventory
60
How to Create Chart 1- the Inventory-Listing Chart1.
 
Create the chart of items, which will display in order from oldest to newest the beginninginventory and all of the items in inventory that were purchased during the year. Start withthe beginning inventory, which is any item(s) left in stock at the end of the prior year.Then list in order of purchase date items of inventory purchased during the year. You willstart the chart with the four columns which will be labeled as follows:
(a)Purchase Dates(b)Numberof units(c)Cost perunit(d)Totalextended cost(b) X (c) = (d)
2.
 
Fill in the information of how many purchases, the number of units per purchase, the costper unit for each purchase. Multiply across the number of units times the cost per unit toget the total extended cost.3.
 
Total down the columns for number of units and total extended cost. This will give youtotal units and goods available for sale. There is no need to total column (c) Cost per unitbecause it provides no useful information.4.
 
Subtract the total units sold for the total units available for sell in column (b) Number of units to get the number of units in ending inventory.
*Note: This chart is used in calculating the cost of ending inventory and cost of goods sold under all three-inventory valuation methods.
 
Periodic Inventory Valuation Methods
MJC Revised 12/2010 Page 2
FIFO Method
Chart 1-Use chart 1 from page 1.Chart 2
 – 
the calculation for the value of ending inventory:
Purchase Date Number of units Cost per unit Total Extended Cost 
Forth purchase 30 11 330Third purchase 20 10 200Second purchase 10 9 90Total ending cost 60 $620Chart 3
 – 
the calculation for the value of Cost of Goods Sold:Item Title AmountGoods Available for Sale 1,260Less: Cost of Ending Inventory 620Equals: Cost of Goods Sold $640Chart 4
 – 
the calculation for the value of Cost of Goods sold using the check method.Item Title Number of units Cost per unit Total Extended CostBeginning Inventory 20 7 140First purchase 40 8 320Second purchase 20 9 180Cost of Goods Sold 80 X 640
*Note that the total cost in chart 4 is the same as the total cost in chart 3.
 
Periodic Inventory Valuation Methods
MJC Revised 12/2010 Page 3
FIFO Method
How to create chart 2
 – 
the cost of ending inventory chart for FIFO1.
 
For FIFO you will need to use these headings for chart 2:
(a)Purchase Date(b)Number of units(c)Cost per unit (d)Total Extended Cost 
2.
 
FIFO starts from the bottom of the inventory-listing chart, which is chart 1. Use number
of unit’s column (b) and count up until you reach the number of units in the ending
inventory. On chart one each row is designated by the date those units were purchased.The rows have the number of units that were purchased on that date in time, the unit pricepaid for those units along with the total extended cost for all the units purchased on thatdate.You will find that in counting units in chart 1 from the bottom up that the number of ending units for the last row to complete the total number of units in ending inventorymay not be completely used up because some of those units were sold during the year andtherefore are no longer in the ending inventory. For the last row used, you will need tomultiply the number of units that are needed to complete the total ending inventory timesthe cost per unit to get the correct value for the row.3.
 
Once you have the units counted out then multiply out the unit by the unit cost in eachrow to get the total extended cost.4.
 
Now total the columns for number of units and total extended cost. These two columnswill give you ending inventory in units and ending inventory cost. Never total the columnfor cost per unit down because it has no useful meaning or value.
How to create chart 3
 – 
Cost of Goods Sold chart for FIFO
1.
 
For FIFO you will need to use this chart:Item Title AmountGoods Available for SaleLess: Cost of Ending InventoryEquals: Cost of Goods Sold2.
 
Goods Available for Sale in dollar amounts comes from chart 1 - the inventory-listingchart. You will find that information at the bottom of the chart on the right hand side of your page.

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