LIFO valuation under periodic inventory system
Date | Transactions | Units Sold | Unit Cost | Inventory Units | May 1 | Beginning Inventory | 700 | $10 | 700 | May 3 | Purchase | 100 | $12 | 800 | May 8 | Sale (*1) | (500) | ?? | 300 | May 15 | Purchase | 600 | $14 | 900 | May 19 | Purchase | 200 | $15 | 1,100 | May 25 | Sale (*2) | (400) | ?? | 700 | May 27 | Sale (*3) | (100) | ?? | 600 | May 31 | Ending Inventory | | ?? | |
Under periodic inventory system, cost of inventories is calculated at the end of each accounting period (on May 31 in this example).
[May 31, 2010] Quantity of ending inventory = Beginning inventory + Units purchased - Units sold = 700 + 900 - 1,000 = 600 units
Using LIFO, units purchased last are assumed to be sold first. 1,000 units sold = 200 units from May 19 purchases at $15 unit cost + 600 units from May 15 purchases at $14 unit cost + 100 units from May 3 purchases at $12 unit cost + 100 units from beginning inventory at $10 unit cost
Cost of goods sold = 200x$15 + 600x$14 + 100x$12 + 100x$10 = $3,000 + $8,400 + $1,200 + $1,000 = $13,600
600 units of inventory left = 600 units from beginning inventory at $10 unit cost
Cost of ending inventory = 600x$10 = $6,000 |
Moving Average valuation under perpetual inventory system
Date | Transactions | Units Sold | Unit Cost | Inventory Units | Moving Average Unit Cost | May 1 | Beginning Inventory | 700 | $10 | 700 | $10 | May 3 | Purchase | 100 | $12 | 800 | $10.25 (*1) | May 8 | Sale | (500) | ?? | 300 | $10.50 | May 15 | Purchase | 600 | $14 | 900 | $12.75 (*2) | May 19 | Purchase | 200 | $15 | 1,100 | $13.16 (*3) | May 25 | Sale | (400) | ?? | 700 | 700 | May 27 | Sale | (100) | ?? | 600 | 600 | May 31 | Ending Inventory | | ?? | | |
(*1) Average cost of 800 units = (700x$10 + 100x$12) / (700 + 100) = ($7,000 + $1,200) / 800 = $8,200 / 800 = $10.25
Cost of goods sold on May 8 = 500x$10.25 = $5,125
(*2) Average cost of 900 units = (300x$10.25 + 600x$14) / (300 + 600) = ($3,075 + $8,400) / 900 = $11,475 / 900 = $12.75
(*3) Average cost of 1,100 units = (900x$12.75 + 200x$15) / (900 + 200) = ($11,475 + $3,000) / 1,100 = $14,475 / 1,100 = $13.16
Cost of goods sold on May 25 = 400x$13.16 = $5,264 Cost of goods sold on May 27 = 100x$13.16 = $1,316
Total cost of goods sold = 500x$10.25 + 400x$13.16 + 100x$13.16 = $5,125 + $5,264 + $1,316 = $11,705
Cost of ending inventory = Beginning inventory + Cost of purchases - Cost of goods sold = $7,000 + (100x$12 + 600x$14 + 200x$15) - $11,705 = $7,000 + $12,600 - $11,705 = $7,895
[Checking] Quantity of ending inventory = Beginning inventory + Units purchased - Units sold = 700 + 900 - 1,000 = 600 units
Cost of ending inventory = 600 x $13.16 (Moving Average cost per unit as of May 31) = $7,896 $7,896 - $7,895 = $1 (rounding error) |
Weighted Average valuation under periodic inventory system
Date | Transactions | Units Sold | Unit Cost | Inventory Units | May 1 | Beginning Inventory | 700 | $10 | 700 | May 3 | Purchase | 100 | $12 | 800 | May 8 | Sale (*1) | (500) | ?? | 300 | May 15 | Purchase | 600 | $14 | 900 | May 19 | Purchase | 200 | $15 | 1,100 | May 25 | Sale (*2) | (400) | ?? | 700 | May 27 | Sale (*3) | (100) | ?? | 600 | May 31 | Ending Inventory | | ?? | |
Under periodic inventory system, cost of inventories is calculated at the end of each accounting period (on May 31 in this example).
[May 31, 2010] Quantity of ending inventory = Beginning inventory + Units purchased - Units sold = 700 + 900 - 1,000 = 600 units
Weighted average cost per unit = (700x$10 + 100x$12 + 600x$14 + 200x$15) / (700+100+600+200) = ($7,000 + $1,200 + $8,400 + $3,000) / 1,600 = $19,600 / 1,600 = $12.25
Cost of goods sold = (500 + 400 + 100) x $12.25 = 1,000 x $12.25 = $12,250
Cost of ending inventory = 600 x $12.25 = $7,350
[Checking] Cost of ending inventory = Beginning inventory + Purchases - Cost of Goods Sold = $7,000 + (100x$12 + 600x$14 + 200x$15) - $12,250 = $7,000 + $12,600 - $12,250 = $7,350 |