ACCOUNTING 2030

CHAPTER 7 HANDOUT

Inventory Cost Flow Methods

Consider the following inventory activity, as outlined on slide 13:

Date Description # of Units $/unit Total $

10/1 Beginning Inventory 10 $7 $70
10/3 Purchase 30 $8 $240
10/5 Purchase 10 $10 $100
GOODS AVAILABLE FOR SALE 50 $410
10/6 Sales (35) ? ?
Ending Inventory 15 ? ?

Compute ending inventory and cost of goods sold under each of the three methods. Remember
these three rules:
1. Keep the units straight – this is the “truth” and doesn’t vary between methods
2. Start with Goods Available for Sale – this is your total pool to allocate between EI & CGS
3. When you’re finished, make sure that EI + CGS = GAS

FIFO Ending Inventory

# of Units $/unit Total $

FIFO Cost of Goods Sold

# of Units $/unit Total $

EI + CGS
 LIFO Ending Inventory
# of Units $/unit Total $

LIFO Cost of Goods Sold

# of Units $/unit Total $

EI + CGS

Weighted Average Cost

Goods Available for Sale – Total $
Goods Available for Sale – # of Units
Weighted Average Cost per Unit

WAC Ending Inventory

# of Units WAC/unit Total$

WAC Cost of Goods Sold

# of Units WAC/unit Total$

EI + CGS