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 12 jan 2nd feb 5 july 4 aug 30 oct Purchases sales purchase purchase sales 200 units @ 11 400 units @ 15 300 units @ 11 100 units @ 12 400 units @ 16 3000 2200 6000 33 00 1200 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 12 jan 5 july Purchases purchase 200 units @ 11 300 units @ 11 800 units sold 3000 2200 3300 8600 cost of good sold

77 per unit avg cost 800 units sold x 10.Cost of ending inventory (fifo) 4 aug purchase 100 units @ 12 1200 Cost of good sold (Lifo) 4 aug 5july 12 jan purchase purchase Purchases 100 units @ 12 300 units @ 11 200 units @ 11 1200 3300 2200 2000 8700 cost of good sold Merchandise inventory ( opening ) 200 units @ 10 800 units sold Cost of ending inventory (Lifo) Merchandise inventory ( opening ) 100 units @ 10 1000 Cost of good sold (Average) Merchandise inventory ( opening ) 300 units @ 10 12 jan 5 july 4 aug Purchases purchase purchase 200 units @ 11 300 units @ 11 100 units @ 12 900 Average formula 3000 2200 3300 1200 9700 average cost= total units cost/number of units =9700/900 10.77= 8616 cost of good sold Cost of ending inventory (average) Merchandise inventory ( opening ) 300 units @ 10 12 jan 5 july Purchases purchase 200 units @ 11 300 units @ 11 3000 2200 3300 .

77 per unit avg cost Ending inventory units 100 x 10.4 aug purchase 100 units @ 12 900 1200 9700 Average formula average cost= total units cost/number of units =9700/900 10.77=1077 .

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