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    sakti's Avatar
    sakti Posts: 8, Reputation: 1
    New Member
     
    #1

    Jul 8, 2009, 07:30 PM
    Fifo,lifo,average method
    Jan 2005 bought 10@ $30
    April 2005 bought 10@$34
    October 2005 bought 20@$40
    May 2005 sold 8@$50
    Nov 2005 sold 24@$60

    Required to show the comparison of the closing stock at the end of the year by using fifo, lifo, average costion method

    Please hepl me out of this question
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
     
    #2

    Jul 8, 2009, 11:22 PM

    What is the method used for inventory valuation - periodic or perpetual? First try to solve yourself and post your answers. Help will be available for corrections.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
     
    #3

    Jul 9, 2009, 12:02 AM

    Here are some examples:
    Inventory and Cost of Goods Sold | AccountingCoach.com

    Because there are 3 methods here, plus each could be perpetual or periodic, you're talking about 6 things in total. That is an entire chapter and a lot to try to show someone from scratch. That's why I gave the link.

    You can try them one at a time, have them checked, see how you do, and then move on to the next.
    sakti's Avatar
    sakti Posts: 8, Reputation: 1
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    #4

    Jul 15, 2009, 06:29 AM

    please correct the mistake for this question.


    fifo

    jan 95 10@ $30 stock valuation 10@$30= 300

    April 95 10@ $34 stock valuation 10@$30
    10@$34= 640

    oct 95 20@$40 stock valuation 10@ $30
    10@$34
    10@$40 = 1440

    may 95 unit out 8@$50 stock valuation 12$34
    20$40= 1208

    nov 95 unit out 24@$60 stock valuation 20$40= 800



    LIFO

    jan 95 10@$30 stock valuation 10$30= 300

    apr 95 10@$34 stock valuation 10$30
    10$34=640

    oct 95 20@$40 stock valuation 10$30
    10$34
    20$40= 1440

    may 95 unit out 8@$50 stock valuation 10$30
    10$34
    12$40= 1120

    nov 95 unit out 24@$50 stock valuation 10$ 30
    10$34= 640
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    Jul 15, 2009, 08:17 PM
    I'm going to say first that the way you've presented the information is a bit on the confusing side. You also have never indicated whether you are supposed to be doing periodic or perpetual. It actually looks like you're valuating using costs periodically, but presenting the info as though you're doing perpetual. As I said, the way the info is presented is confusing and I'm not even sure which method you're trying to do. Meaning, I can't tell you everything you're doing incorrectly, can't tell you how to do it correctly, nor what any actual answers are.

    There are, however, certain things I can tell you.

    fifo

    jan 95 10@ $30 stock valuation 10@$30= 300

    April 95 10@ $34 stock valuation 10@$30
    10@$34= 640

    oct 95 20@$40 stock valuation 10@ $30
    10@$34
    10@$40 = 1440
    The information would never be presented as above. If you were doing perpetual, you would have to stop after April and figure in the sale that was made, not continue on to the next purchase. If you were doing periodic, there would be no need at all to show the Jan and Apr valuations separately like that - you'd only need to show how all three of them come out. For instance, the info you have on purchases is:

    Jan 10 @ $30 = $300
    April 10 @ $34 = 340
    Oct 20 @ $20 = $800
    = total of $1440

    You would only have to split that all apart if you're doing perpetual, and as I said, in that case you have to stop after April and show the sale. This is part of what makes the info confusing. Also -- your columns didn't show up. People post and never look at what they post to see if it's legible.

    may 95 unit out 8@$50 stock valuation 12$34
    20$40= 1208
    You're valuing inventory and showing what costs will be used when you sell something. The retail price is irrelevant to that -- don't present it at all because it adds to the confusion and makes it look like you're using that $50 for something when you're not.

    I would like to know how you got 12 units @ $34 left over in inventory when you never had that many to begin with. You only had 10 units at $34. You can't create more by selling some. The problem is that people insist on keeping these price categories together as lump sums. i.e. you sold 8 - you knew they cost $30, but you don't want to take the $30 ones and split it between 8 sold and 2 unsold. So instead you just said there's 12 of the $34 ones left when there weren't 12 at all. You still have 2 of the $30 ones. Do you see that? And you have all 10 of the $34 ones. (And all of the $40 ones also.)

    nov 95 unit out 24@$60 stock valuation 20$40= 800
    Your math doesn't work. You need to stop and think about that. You had 32 units total before this second sale. You are now selling 24. So how do you have 20 units left? Again, I think it's because you don't want to take that $40 price category and split them apart. They aren't glued together. Literally see the inventory sitting around. You happen to purchase 20 units all at the same time at $40. But you aren't allowed to sell some of them and have some of them left over, just because they were purchased at the same price? Think about that for a while, because it doesn't make any sense.

    (Although you aren't necessarily doing anything I haven't seen a trillion other people do. The problem is they're always thinking "abstract accounting stuff" somewhere in the back of their head, instead of picturing the logic behind what is actually going on. Picture the warehouse and watch the units moving in and out, and stop thinking about "accounting.")



    LIFO

    may 95 unit out 8@$50 stock valuation 10$30
    10$34
    12$40= 1120
    This isn't going to work this way. If you're doing periodic, you would not stop and take out only the 8 you sold in May. You would do everything all at once at the end of the year. I have a feeling you're attempting to do perpetual. If that is the case, if you follow the dates in order, you did not even have the $40 ones in May when the first sale was made, right?

    So you need to determine which method you're using. I can't tell you what specifically is wrong if I don't know what method you're using. Rehmanvohra specifically asked which method, and I also mentioned there were two. But you haven't answered that question.

    nov 95 unit out 24@$50 stock valuation 10$ 30
    10$34= 640
    Again... you sold 24 total out of 32. So how can you sell 24 of 32 and have 20 left? I know it's because you simply won't break apart those price categories. But look at your final answer. You had 10 at $30, 10 at $34 and 12 at $40. Then you sell 24 of them, but the only thing you dropped off the inventory was the 12 at $40. That doesn't mathematically work.
    sakti's Avatar
    sakti Posts: 8, Reputation: 1
    New Member
     
    #6

    Jul 18, 2009, 09:04 PM
    Quote Originally Posted by sakti View Post
    jan 2005 bought 10@ $30
    april 2005 bought 10@$34
    october 2005 bought 20@$40
    May 2005 sold 8@$50
    nov 2005 sold 24@$60

    required to show the comparison of the closing stock at the end of the year by using fifo, lifo, average costing method. perpetual

    please hepl me out of this question

    My answer is :


    Fifo


    Jan : unit in 10@ 30 stock valuation 300

    Apr : unit in 10@34 stock valuation 640

    May : unit out 8@ $50 stock valuation 408

    Oct : unit in 20@$40 stock valuation 1208

    Nov : unit out 24@$60 stock valuation 1280



    Lifo

    Oct : unit in 20@$40 stock valuation 1208

    Nov : unit out 24@$60 stock valuation 408



    Average costing method


    Date transaction num of items unit cost total cost

    Jan bought 10 $30 $300


    Apr bought 10 $34 $340


    May sold 8 $50 $400

    Oct bought 20 $40 $800

    Nov sold 24 $ 60 $ 1440


    Total 72 $ 3280




    Please correct the mistake
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
     
    #7

    Jul 19, 2009, 01:09 AM
    Quote Originally Posted by sakti View Post

    jan : unit in 10@ 30 stock valuation 300

    apr : unit in 10@34 stock valuation 640
    It just simply doesn't work this way. In April you have both the 10 @ $30 AND the 10 @ $34. Where did the original 10 go? Think about that. They went nowhere, so you still have them.

    However, I'm not saying anything else or spending any time on this until you state whether this is supposed to be perpetual or periodic. It's been mentioned like three times by two of us now, and you've been ignoring the fact that we need that information. How you work it out will depend on that method. So not only do we need the information, but I feel like I'm just wasting my breath.

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