Problem: Startup

Opening stock on 1/1/2020 Nil

Purchases during the year 2020:

On 1/1/2020: 2 units @ 5 10
On 1/4/2020: 2 units @8 16

Sales during the year 2020:

On 31/12/2020: 2units @10 20

What is the Profit during the year 2020?

Problem:
Opening stock on 1/1/2020 Nil
Computation of Profit and Inventory:

Purchases during the year 2020: FIFO

On 1/1/2020: 2 units @ 5 10 Sales 20
On 1/4/2020: 2 units @8 16 COGS for 2 units 10
Profit 10
Sales during the year 2020:
On 31/12/2020: 2units @10 20 Ending Inventory on 31/12/2020 (2 units) 16

What is the Profit during the year 2020?

cash sales 20
cash purchases -26
Net cfo -6
 Weighted
LIFO Average
20 20
16 13
4 7

10 13
Inflationary economic situation: Inflationary
1. Which method shows lower expenses? FIFO
2. Which method shows higher profits? FIFO
3. Which method shows higher inventory in balance sheet? FIFO
4. Under which method the expenses are measured at latest prices? LIFO
5. Under which method the inventory is valued at old prices? LIFO
Additional learning from Chapter 5 (Ramkumar Kakani): Reporting and Analyzing Inventories
6. Under which method the net cash flows from operations would be higher? (ignore taxes) None
Inflationary

Same