The document discusses stock valuation and inventory costing methods under the periodic inventory system in Tanzania. It provides definitions of inventory/stock and outlines acceptable inventory classification and costing concepts. It then describes the periodic inventory system and different cost flow assumptions (FIFO, LIFO, weighted average) used to value ending inventory. Examples are provided to illustrate calculations of ending inventory and cost of goods sold under each method. The document also discusses estimating inventory values using the gross profit and retail methods.
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The Cigar Box® is a unique toolkit. It consists of simple, yet concise spreadsheets which help the entrepreneur to calculate his/her cost of goods, margins, contribution, break-even volumes and profitability. For a single product or a complete portfolio of products.
The definition of “Cost of Goods Sold” is the cost of goods that have been removed from inventory and delivered to customers (sold) during an accounting period
The Cigar Box® is a unique toolkit. It consists of simple, yet concise spreadsheets which help the entrepreneur to calculate his/her cost of goods, margins, contribution, break-even volumes and profitability. For a single product or a complete portfolio of products.
Montoure Company uses a perpetual inventory system. It entered into .pdfmccarthygaussvanst87
Montoure Company uses a perpetual inventory system. It entered into the following calendar-
year purchases and sales transactions. (For specific identification, units sold consist of 600 units
from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase,
50 from the August 21 purchase, and 250 from the September 5 purchase.) Date Activities Units
Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $45.00 per unit
Feb. 10 Purchase 400 units @ $42.00 per unit Mar. 13 Purchase 200 units @ $27.00 per unit
Mar. 15 Sales 800 units @ $75.00 per unit Aug. 21 Purchase 100 units @ $50.00 per unit Sept. 5
Purchase 500 units @ $46.00 per unit Sept. 10 Sales 600 units @ $75.00 per unit Totals 1,800
units 1,400 units Required 1.Compute cost of goods available for sale and the number of units
available for sale. 2.Compute the number of units in ending inventory. 3.Compute the cost
assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific
identification. (Round all amounts to cents.) Check (3) Ending inventory: FIFO, $18,400; LIFO,
$18,000; WA, $17,760 4.Compute gross profit earned by the company for each of the four
costing methods in part 3. (4) LIFO gross profit, $45,800
Solution
Answer
Purchase
Units
Rate
Amount
Feb-10
400
42
16800
Mar-13
200
27
5400
Aug-21
100
50
5000
Sep-05
500
46
23000
Total
1200
50200
Sales
Units
Rate
Amount
Mar-15
800
75
60000
Sep-10
600
75
45000
0
Total
1400
105000
Cost of Goods Available for Sale = Opening Inventory + Purchases
= 27000 + 50200 = $77,200
Closing Inventory = Opening Inventory + Purchased units - Sold Units
= 600 + 1200 – 1400 = 400 units
First, FIFO
FIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening Jan 1
600
45.00
27000
600
45.00
27000.00
Feb 10 Purchase
400
42.00
16800
600
45.00
27000.00
400
42.00
16800.00
Mar 13 Purchase
200
27.00
5400
600
45.00
27000.00
400
42.00
16800.00
200
27.00
5400.00
Mar 15 Sales
600
45.00
27000
200
42.00
8400.00
200
42.00
8400
200
27.00
5400.00
Aug 21 purchased
100
50.00
5000
200
42.00
8400.00
200
27.00
5400.00
100
50.00
5000.00
Sept 5 Purchase
500
46.00
23000
200
42.00
8400.00
200
27.00
5400.00
100
50.00
5000.00
500
46.00
23000.00
Sep 10 Sales
200
42.00
8400
400
46.00
18400.00
200
27.00
5400
100
50.00
5000
100
46.00
4600
TOTAL
1800
77200
1400
58800
400
18400.00
Units
Value
Cost of Goods Sold
1400
58800
Closing Inventory
400
18400
LIFO Method
LIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening Jan 1
600
45.00
27000
600
45.00
27000.00
Feb 10 Purchase
400
42.00
16800
600
45.00
27000.00
400
42.00
16800.00
Mar 13 Purchase
200
27.00
5400
600
45.00
27000.00
400
42.00
16800.00
200
27.00
5400.00
Mar 15 Sales
200
27.00
5400
400
45.00
18000.00
400
42.00
16800
0.00
200
45.00
9000
Aug 21 purchased
100
50.00
5000
400
45.00
18000.00
100
50.00
5000.00
0.00
Sept 5 Purchase
500
46.00
23000
400
45.00
18000.00
100
50.00
5000.00
500
46.00
23000.00
Sep 10 Sales
500
46.00
23000
400
4.
Inventory Valuation FIFO, LIFO, and Average The company reported the.pdfxlynettalampleyxc
Inventory Valuation: FIFO, LIFO, and Average The company reported the following inventory
data for the year: Practice 9-7 Units Cost per Unit 300 $1750 Beginning inventory Purchases:
900 1,200 400 18.00 18.25 March 23. Units remaining at year-end. . . . . . .. Compute (1) cost of
goods sold and (2) ending inventory assuming (a) FIFO inventory valuation, (b)LIFOin- ventory
valuation, and (c) average cost inventory valuation. The company uses a periodic inventory
system Practice 9-8 Inventory Valuation: Complications with a Perpetual System Refer to
Practice 9-7. Assume that the sales occurred as follows: Units Sold 100 600 1,300 July 15
November 1 Total Compute (1) cost of goods sold and (2) ending inventory assuming (a) FIFO
inventory valuation, (b) LIFO inven- tory valuation, and (c) average cost inventory valuation,
The company uses a perpetual inventory system
Solution
Answer
Units sold = 2400 – 400 = 2000
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
300
17.5
5250
0
17.5
0
Purchases:
Mar-23
900
18
16200
900
18
16200
0
18
0
Sep-16
1200
18.25
21900
800
18.25
14600
400
18.25
7300
TOTAL
2400
43350
2000
36050
400
7300
LIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
0
17.5
0
300
17.5
5250
Purchases:
Mar-23
900
18
16200
800
18
14400
100
18
1800
Sep-16
1200
18.25
21900
1200
18.25
21900
0
18.25
0
TOTAL
2400
43350
2000
36300
400
7050
---Average Cost Valuation
Cost of opening units + Purchases = $43350
Opening units + Purchased units = 2400
Average cost = 43350 / 2400 = $18.0625 per unit
Cost of Goods Sold = 2000 units sold x $18.0625 = $36125
Value of ending Inventory = 400 units x $18.0625 = $7225
FIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
200
17.50
3500
500
18.00
9000.00
400
18.00
7200
Sept 16 Purchase
1200
18.25
21900
500
18.00
9000.00
1200
18.25
21900.00
Nov 1 Sale
500
18.00
9000
400
18.25
7300.00
800
18.25
14600
TOTAL
2400
43350
2000
36050
400
7300.00
Units
Value
Cost of Goods Sold
2000
36050
Closing Inventory
400
7300
LIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
600
18.00
10800
200
17.50
3500.00
0
0.00
0
300
18.00
5400.00
Sept 16 Purchase
1200
18.25
21900
200
17.50
3500.00
300
18.00
5400.00
1200
18.25
21900.00
Nov 1 Sale
1200
18.25
21900
200
17.50
3500.00
100
18.00
1800
200
18.00
3600.00
TOTAL
2400
43350.00
2000
36250.00
400
7100
Units
Value
Cost of Goods Sold
2000
36250
.
The Cigar Box® is a unique toolkit. It consists of simple, yet concise spreadsheets which help the entrepreneur to calculate his/her cost of goods, margins, contribution, break-even volumes and profitability. For a single product or a complete portfolio of products.
The definition of “Cost of Goods Sold” is the cost of goods that have been removed from inventory and delivered to customers (sold) during an accounting period
The Cigar Box® is a unique toolkit. It consists of simple, yet concise spreadsheets which help the entrepreneur to calculate his/her cost of goods, margins, contribution, break-even volumes and profitability. For a single product or a complete portfolio of products.
Montoure Company uses a perpetual inventory system. It entered into .pdfmccarthygaussvanst87
Montoure Company uses a perpetual inventory system. It entered into the following calendar-
year purchases and sales transactions. (For specific identification, units sold consist of 600 units
from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase,
50 from the August 21 purchase, and 250 from the September 5 purchase.) Date Activities Units
Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $45.00 per unit
Feb. 10 Purchase 400 units @ $42.00 per unit Mar. 13 Purchase 200 units @ $27.00 per unit
Mar. 15 Sales 800 units @ $75.00 per unit Aug. 21 Purchase 100 units @ $50.00 per unit Sept. 5
Purchase 500 units @ $46.00 per unit Sept. 10 Sales 600 units @ $75.00 per unit Totals 1,800
units 1,400 units Required 1.Compute cost of goods available for sale and the number of units
available for sale. 2.Compute the number of units in ending inventory. 3.Compute the cost
assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific
identification. (Round all amounts to cents.) Check (3) Ending inventory: FIFO, $18,400; LIFO,
$18,000; WA, $17,760 4.Compute gross profit earned by the company for each of the four
costing methods in part 3. (4) LIFO gross profit, $45,800
Solution
Answer
Purchase
Units
Rate
Amount
Feb-10
400
42
16800
Mar-13
200
27
5400
Aug-21
100
50
5000
Sep-05
500
46
23000
Total
1200
50200
Sales
Units
Rate
Amount
Mar-15
800
75
60000
Sep-10
600
75
45000
0
Total
1400
105000
Cost of Goods Available for Sale = Opening Inventory + Purchases
= 27000 + 50200 = $77,200
Closing Inventory = Opening Inventory + Purchased units - Sold Units
= 600 + 1200 – 1400 = 400 units
First, FIFO
FIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening Jan 1
600
45.00
27000
600
45.00
27000.00
Feb 10 Purchase
400
42.00
16800
600
45.00
27000.00
400
42.00
16800.00
Mar 13 Purchase
200
27.00
5400
600
45.00
27000.00
400
42.00
16800.00
200
27.00
5400.00
Mar 15 Sales
600
45.00
27000
200
42.00
8400.00
200
42.00
8400
200
27.00
5400.00
Aug 21 purchased
100
50.00
5000
200
42.00
8400.00
200
27.00
5400.00
100
50.00
5000.00
Sept 5 Purchase
500
46.00
23000
200
42.00
8400.00
200
27.00
5400.00
100
50.00
5000.00
500
46.00
23000.00
Sep 10 Sales
200
42.00
8400
400
46.00
18400.00
200
27.00
5400
100
50.00
5000
100
46.00
4600
TOTAL
1800
77200
1400
58800
400
18400.00
Units
Value
Cost of Goods Sold
1400
58800
Closing Inventory
400
18400
LIFO Method
LIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening Jan 1
600
45.00
27000
600
45.00
27000.00
Feb 10 Purchase
400
42.00
16800
600
45.00
27000.00
400
42.00
16800.00
Mar 13 Purchase
200
27.00
5400
600
45.00
27000.00
400
42.00
16800.00
200
27.00
5400.00
Mar 15 Sales
200
27.00
5400
400
45.00
18000.00
400
42.00
16800
0.00
200
45.00
9000
Aug 21 purchased
100
50.00
5000
400
45.00
18000.00
100
50.00
5000.00
0.00
Sept 5 Purchase
500
46.00
23000
400
45.00
18000.00
100
50.00
5000.00
500
46.00
23000.00
Sep 10 Sales
500
46.00
23000
400
4.
Inventory Valuation FIFO, LIFO, and Average The company reported the.pdfxlynettalampleyxc
Inventory Valuation: FIFO, LIFO, and Average The company reported the following inventory
data for the year: Practice 9-7 Units Cost per Unit 300 $1750 Beginning inventory Purchases:
900 1,200 400 18.00 18.25 March 23. Units remaining at year-end. . . . . . .. Compute (1) cost of
goods sold and (2) ending inventory assuming (a) FIFO inventory valuation, (b)LIFOin- ventory
valuation, and (c) average cost inventory valuation. The company uses a periodic inventory
system Practice 9-8 Inventory Valuation: Complications with a Perpetual System Refer to
Practice 9-7. Assume that the sales occurred as follows: Units Sold 100 600 1,300 July 15
November 1 Total Compute (1) cost of goods sold and (2) ending inventory assuming (a) FIFO
inventory valuation, (b) LIFO inven- tory valuation, and (c) average cost inventory valuation,
The company uses a perpetual inventory system
Solution
Answer
Units sold = 2400 – 400 = 2000
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
300
17.5
5250
0
17.5
0
Purchases:
Mar-23
900
18
16200
900
18
16200
0
18
0
Sep-16
1200
18.25
21900
800
18.25
14600
400
18.25
7300
TOTAL
2400
43350
2000
36050
400
7300
LIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
0
17.5
0
300
17.5
5250
Purchases:
Mar-23
900
18
16200
800
18
14400
100
18
1800
Sep-16
1200
18.25
21900
1200
18.25
21900
0
18.25
0
TOTAL
2400
43350
2000
36300
400
7050
---Average Cost Valuation
Cost of opening units + Purchases = $43350
Opening units + Purchased units = 2400
Average cost = 43350 / 2400 = $18.0625 per unit
Cost of Goods Sold = 2000 units sold x $18.0625 = $36125
Value of ending Inventory = 400 units x $18.0625 = $7225
FIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
200
17.50
3500
500
18.00
9000.00
400
18.00
7200
Sept 16 Purchase
1200
18.25
21900
500
18.00
9000.00
1200
18.25
21900.00
Nov 1 Sale
500
18.00
9000
400
18.25
7300.00
800
18.25
14600
TOTAL
2400
43350
2000
36050
400
7300.00
Units
Value
Cost of Goods Sold
2000
36050
Closing Inventory
400
7300
LIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
600
18.00
10800
200
17.50
3500.00
0
0.00
0
300
18.00
5400.00
Sept 16 Purchase
1200
18.25
21900
200
17.50
3500.00
300
18.00
5400.00
1200
18.25
21900.00
Nov 1 Sale
1200
18.25
21900
200
17.50
3500.00
100
18.00
1800
200
18.00
3600.00
TOTAL
2400
43350.00
2000
36250.00
400
7100
Units
Value
Cost of Goods Sold
2000
36250
.
Week Three Exercise AssignmentInventory1. Specific ide.docxwendolynhalbert
Week Three Exercise Assignment
Inventory
1.
Specific identification method
. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows.
Painting
Cost
1/2 Beginning inventory
Woods
$21,000
4/19 Purchase
Sunset
21,800
6/7 Purchase
Earth
31,200
12/16 Purchase
Moon
4,000
Woods
and
Moon
were sold during the year for a total of $35,000. Determine the firm’s
a. cost of goods sold.
b. gross profit.
c. ending inventory.
2.
Inventory valuation methods: basic computations
. The January beginning inventory of the White
Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 Units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.
FIFO
LIFO
Weighted Average
Goods available for sale
$
$
$
Ending inventory, March 31
Cost of goods sold
3.
Perpetual inventory system: journal entries
. At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions that occurred during 20X3 follow:
·
1/2/20X3 Purchases on account: 500 units @$6 =
$3,000
·
1/15/20X3 Sales on account: 300 units @ $8.50 = $2,550
·
1/20/20X3 Purchases on Account: 200 units @ 5 = $1,000
·
1/25/20X3
Sales on Account: 300 units @ $8.50 = $2,550
The company president examined the computer-generated journal entries for these transactions and was confused by the absence of a Purchases account.
a. Duplicate the journal entries that would have appearedon the computer printout under FIFO & LIFO
b. Calculate the balance in the firm’s Inventory account under each method.
c. Briefly explain the absence of the Purchases account to the company president.
4. Inventory valuation methods: computations and concepts.
Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
Date
Quantity
Unit Cost
Total Cost
1/3
100
$125
$12,500
4/3
200
$135
$27,000
6/3
100
$145
$14,500
7/3
100
$155
$15,500
Total
500
$69,500
Wild Riders sold 400 boards at $250 per board on the dates listed below.
The company uses a perpetual inventory system.
Date
Quantity Sold
Unit Price
Total Sales
3/17
50
$250
$12,500
5/17
75
$250
$18,750
8/10
275
$250
$68,750
Total
400
$100,000
Instructions
a.
Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
·
First-in, first-out
·
Last-in, first-out
·
Weighted average
b. Which of the three methods would be chosen if management’s goal is to
(1) produce an up-to-date inventory valuation o.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
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STOCK VALUATION
1. STOCK VALUATION
Concept;
Stock/inventory;
The Tanzania statementof AccountingGuidelinesNo2 which deals with
the valuationof inventoriesin the context of the historicalcost system
statesthat the term stock/inventoriesincludethefollowing;
1. Goods or other assetspurchased
2. Consumablestores/consumer goods
3. Raw materialsand componentspurchased for incorporationinits
productsfor sale
4. Productsand servicesin intermediatestagesof completion
5. Finished goods
6. Long-term contract balance
7. Farmscrops
8. Livestock
CLASSIFICATION AND COST
Stocktaking; Is the processof determining thequantitiesofall items
of merchandizeowned by the businessfirm at the certaindate,
usually at the end of accounting period. Thisinvolves the actual
accounting, measureand weighingof all itemsof unsold merchandize
(stock) in thestore.
Inventories/stockis classified asassets (currents) in thebalancesheet
as it is expected that thisstockwill be sold and be replaced withinone
accounting period.
Accounting for inventoriesnormally follows the cost concept which
meansstocks are recorded at acquisitioncost or whichever is lower.
NOTE;
1. All itemsof due stock belonging to the businesseven those in transit
have been included in the inventory figure.
2. All itemsof merchandize(stock) recorded in the inventorylist are
legally owned by the business.
STOCK COSTINGMETHOD
2. After determining thequantityof merchandizestockat the end of the
accounting period, (thebalancesheet date) the next step is to assigna cost
to each item of merchandizeinorder to arriveat the value of theending
inventory to be presented in the financialstatement
There aretwo stock/inventorysystemswhich are;
1. Perpetualstocksystem
2. Periodic stocksystem
Certainassumptionsare needed to be madeon the flow of goods and
their related costs.
1. First in first out (FIFO); the assumptionisthat the oldest itemsin the
stock arethe first ones sold. Under thismethod, the ending inventory
is assumed to be comprised of the latest purchases. Thisis a logical
assumptionfor businesses dealing in perishablegoods; FIFO
representsa naturalflow of merchandize.
2. Last in first out (LIFO); the assumptionisthat, themost recent items
in stock arethe first ones sold. Exampleof these is fashionablegoods.
Under thismethod theending stockis assumed to be comprised of
the earliest purchases.
3. Averagecost (AVCO), the stockitemshas been intermingled, so that
the goods sold and the ending stock consistsof mixed units. Under
thismethod a weighted averageunit cost is calculated for all stock
items.
W.A.C=Weighted AverageCost
W.A.C= (Total cost purchase+ opening stock)/(Totalunit)
PERIODIC METHOD
EXAMPLE
3. Date:purchases
1/1 = 100 units @ 30/=
5/1 = 50 units @ 40/=
10/1= 40 units @ 50/=
Sales = 2/1 = 90 units@ 60/=
6/1= 40 units @ 70/=
11/1 = 30 units@ 50/=
Required: Byusing periodic method calculatethevalue of closing stock by
FIFO and LIFO
FIFO; totalamount of sales → 160=90+40+30
Amount of purchases= 190 units=100+50+40
Closing stock=190-160=30 units
30 x 50 = 1500
;. Closing stock of FIFO = 1500
NOTE: Closing stockby FIFO will be valued by the last unitsvalue to be
purchased.
LIFO; Totalamount of sales = 160
Amount of purchases → last in first out 190 =100+ 50 + 40
Closing stock = 190-160
30 x 30 = 900
4. :. Closing stock of LIFO = 900.
NOTE: Closing stock by LIFO will be valued at 30@, the value of list units
to be purchased
Workings
Total purchase
1/1/ 100 units@30= 3000
5/1 50 units@ 40= 2000
10/1 40 units@ 50= 2000
7000
Total sales
2/1 90 units @ 60 = 5400
6/1 40 units @70 = 2800
11/1 30 units50 = 1500
9700
Prepare financial statement for the year/periodending 31Jan.
Note: Using periodic method by FIFO, LIFO and WAC
FIFO LIFO WAC
Sales 9700 9700 9700
Less: LOGS
7000
(1500)
7000
(900)
7000
(1105)
5. LOGS 5500 6100 5895
Gross profit 4200 3600 3805
=36.84
Closing stock value=30 unitsx36.84
=1105
ILLUSTRATION 2
Sinza wholesaler deals in locally madedoor mats. During 199x, its records
show the following transactionsrelated tothisparticularmerchandize.
Stockon hand at 31.12.199x was 70 units(650-580)
Totalsales for the year wasTshs.250,000
Using a period inventorysystem
1. First-in first-out (FIFO)method
The70 unitson hand will be assigned thefollowing costs;
50 x 340 = 17,000 (Novpurchases).
20 x 330 = 6,600 (August purchases).
23,600
Notethat in thismethod it is assumed that the ending inventory consistsof
unitsfrom the most recent purchases
The cost of goods sold will be calculated asfollows;
6. Totalpurchases 208,000
Less; ending inventory 23,600
Cost of goods sold 184,400
2. Last-in-first-out(LIFO)Method
The 70 units on hand will be assigned to the following costs;
60x 300 = 18,000 (Jan purchases)
10/70 x 310 = 3,100 (March purchases)
21,100
Notethat in thismethod it is assumed that the ending inventory consistsof
unitsfrom the earliest
The cost of goods sold will be calculated asfollows;
Totalpurchases 208,000
Less; Ending inventory 21,100
Cost of goods sold 186,900
3. Average cost (AVCO) method;
Thismethod will use a weighted a average cost for the year calculated
as follows;
Weighted Averagecost =Total cost of purchases+ opening stock
Tshs. 208,000/ = 320/=
650 units
The ending inventory will be assigned this cost which is 70 units@
shs. 320 = 22,400
The cost of goods sold will be;
7. Totalpurchases 208,000
Less; ending inventory 22,400
185,600
-Notethat the goods sold have thesame shs. 320 unit cost (580 units. @
320= 185,600).
COMPARISON OF INVENTORY COSTINGMETHOD UNDER
PERIODIC SYSTEM
FIFO LIFO AVCO
shs shs shs
Sales 250,000 250,000 250,000
less ; cost of goods sold
Purchases 208,000 208,000 208,000
less ; Ending inventory 23,600 21,000 22,400
184,400 186,900 185,600
65,600 63,100 64,400
During the period of rising pricesasin thisillustration. TheFIFO method
results in the highest grossprofit. This is due to assigning themost recent
prices(Higher prices) to the ending inventory. Thismeans the cost of goods
sold is assumed to be from theearlier purchases(lower prices).
STOCK LEDGER CARD
II. PERPETUAL SYSTEM OF INVENTORY
-Physicalmovement of stock.
ILLUSTRATION 3
On 2nd may, M.LTD received 500 unitsat 20/=
8th mayreceived; 300 unitsat 22/=
8. 10th issued 400 unitsat -
15th issued 200 unitsat -
20th received 600 unitsat 22/=
25th issued 300 unitsat –
27th received 200 unitsat 26/=
30th issued 100 unitsat -
Standard pricefor each unit for the month of May was24/= each, market
priceof these materialson 3rd June is 27 per unit and 400 units were
purchased on that day.
Calculateclosing stock under periodic method applying FIFO, LIFO and
Averagecost (weighted average).
USING A PERPETUAL INVENTORY SYSTEM
1. First-in-first-out(FIFO)Method
A stock record card for the door matswill be maintainedasin the next and
page.
STOCK CARD
DATE
PURCHASES/
RECEIVED
SALES/ISSUED BALANCE
QTY
UNIT
COST
TOTAL
COST
QTY
UNIT
COST
TOTAL
COST
QTY
UNIT
COST
TOTAL
COST
2-May 500 20 10,000 500 20 10,000
8-May 300 22 6600 300 22 6600
16,600 800 16,600
10- - - - 400 20 8000 100 20 2000
9. May
300 22 6,600
400 8600
15-
May
- - - 100 20 2000 200 22 4,400
100 22 2200
200 4,400
20-
May
600 25 15,000 - - - 200 22 4,400
600 25 15,000
800 19,400
25-
May
- - - 200 22 4400
100 25 2500 500 25 12,500
500 12,500
27-
May
200 26 5200 - - - 500 25 12,500
200 26 5,200
700 17,700
30-
May
- - - 100 25 2500 400 25 10,000
200 26 5,200
600 15,200
Purchases 36,800 COGS 21,600 600 15,200
2. By LIFO method (Last In First Out)
STOCK CARD
DATE PURCHASES SALES BALANCE
QTY
UNIT
COST
TOTAL
COST
QTY
UNIT
COST
TOTAL
COST
QTY
UNIT
COST
TOTAL
COST
11. May
800 20.75 16,600
10
May
400 20.75 8300 400 20.75 8300
15
May
200 20.75 4150
200
200
20.75
20.75
4150
4150
20
May
600 25 15,000 600 25 15,000
800 24 19,150
25
July
300 24 7200
27
May
200 26 5200
500
200
24
26
11,950
5200
700 24.5 17,150
31
May
100 24.5 2450
PURCHASES 36,000
Cost of goods
sold
22,100 600 24.5 14,700
14,700=Closing stock
ESTIMATING STOCK
When a businessfirm does not maintaina perpetualinventorysystem, It
has no way of determining the actual stock or inventory on hand unless
the physicalstocktaking is done on a particular date. Thiswill cumbersome
and costly if it has to be done several timesduring anaccounting period.
In order to avoid these inconveniences, the businesswill use an estimated
figuresits ending inventory.
12. There areoccasionswhen it is necessaryto estimateinventory. For-
examplewhen goods are lost or due to theft, a brokerageor natural
deteriorationor evaporation.
There aretwo commonapproachestoestimatestock;
1. Gross profit method
2. Retailmethod
1. GROSS PROFIT METHOD
Thismethod of estimationusesGross profit marginor averagemarkup in
order to determinethecost of goods sold (cost of sales).
*Margin=profit/selling price.
* Markup = profit/cost price.
ILLUSTRATION 1
ABC LTD TRADING A/C FOR THE YEAR ENDED 30/06/2009
Sales 780,000
less; Returninwards 30,000 750,000
less; cost of goods
sold
opening stock 120,000
Add; purchases 660,000 780,000
less; closing stock 180,000 600,000
Gross profit 150,000
Calculate;
1. Gross margininpercentage
2. Averagemarkup in percentage
13. Solution;
1. Gross profit margin=profit/selling pricex 100%
= 25%
ILLUSTRATION 2
Assumein illustration(i.) in the previous pageduring July, August,
September ABChas made;
Purchases 240,000
Net sales 350,000
Calculateinventoryon 30th September, usegrossprofit method to estimate
the
Given data;-
Stockas at 30th/6 180,000
Purchases 240,000
Sales 350,’000
Margin 20%
Calculateclosing stock.
sales 350,000
Opening stock 180,000
Add ; purchases 240,000
cost of goods availablefor sale 420,000
less ; Closing stock 140,000
Cost of goods`sold
14. Gross profit 70,000
ILLUSTRATION 3
On 1st January2004, J.M valued his stockat cost, 12,300. During thefirst
week of January2004, histransactionsinhis stock were as follows;
Purchases 8,100
Sales 13,600
Returns inwards 800
Returns outwards 300
He sells his goods at 25% above cost of goods availablefor sale.
Calculatethe cost of his stockat 7th January2004
Sales 13,600
less ; Return inwards 800 12,800
less ; cost of goods sold
Opening stock 12300
Add ; purchases 8100
20,400
less ; Returns outwards 300
Cost of goods availablefor
sale
20100
less; closing stock 9860
Cost of goods sold. 10,240
Grossprofit 2560
Gross profit P2?800x
Chane mark-up→Margin
15. 25% →20%
20%x12,800→Grossprofit Tshs2560
RETAIL METHOD
Thisestimationtechniqueisemployed to businesswith largeamount
of stocksof relatively low unit’s values.
Usually all itemsare quoted at retailprices
Exampleof businessusing retailmethod is;
1. Largechainstore
2. Supermarket
Thismethod employs the following steps;
1. obtainthecost of goods availablefor sale
2. if sales figureis giventaking the value of goodsavailablefor sale at
retailthe sales figureshould give the value of closing stockat retail
3. the value of closing stock at retailcan beconverted to an approximate
cost figureby using the ratioof cost retailvalue worked out at (a)
above.
ILLUSTRATION
On 1st June; COST RETAIL
Opening stock 180,000 288,000
30th; purchases 145,000 212,000
30th; sales ─ 170,000
Calculate;
1. cost retailratio
2. closing stock at retailvalue
3. Conversion of closing stock at retailvalue to cost.
16. Solution
Cost to retailratio
COST RETAIL
Opening stock 180,000 288,000
Add; purchases 145,000 212,000
325,000 500,000
Ratio= cost/Retailx 100
= 325,000 x 100
500,000
= 65%
Closing stock at retailvalue
COST RETAIL
Opening stock 180,000 288,000
Add; purchases 145,000 212,000
325,000 500,000
Less; Net
sales
170,000
Closing stock 330,000
Conversion of closing stock at retailvalue to cost
Closing stock = 330,000
65 x 330,000
100
= 214,000
17. Conversion of closing stock= 214,000
WEAKNESSOF ESTIMATION METHOD
1. The stock estimationtechniquecovered has assumed that thegross
profit marginisstablein the period of estimation.
2. They also assumethat closing stock will be representativeofall items
which were availablefor sale.
3. If these assumptionsarenot true, then misleading valueswill be
produced.
4. These techniqueshaveto take accountsof realitiesencountered if
they are to yield/ to get/togainacceptableapproximation.
On 1st April2012; Stockat cost was 30,000/=
Purchases 15,000/=
Sales 10,000/=
The normalrateof Gross profit on cost priceis 25% however it is known
that allowancesof 2,000/=havebeen madeto customers.
Calculate;
- Closing stock estimateasat 30th April2012.
Exercise 2.
Due to administrativereasonsW.mahwa, thewholesaler, had to take his
stock on 28th December 2004, onwhich dateit wasvalued at cost at 73,260.
The following transactionstookplacein the next 3 days.
1. Sales book 3400
2. Cash sales 1940
3. Purchasesbooktotal 2310
4. Returns inward book 220
5. Returns outward book 170
6. Carriageinward 425
A detailed examinationofthe books also revealed thefollowing information
18. 1. Sales book includesone invoicefor 280/=against which goodswere
delivered on 2nd January2005.
2. Cash sales includes sales of an item that had a cost value of 42/=but
was sold for 36/= as it has been damaged instore
3. All purchasesmadehad been dully received from supplier
4. A customer returned booksthat has been invoiced to him at 80/= on
29th December 2004but wasissued with a credit loan on 3rd January
2005
5. Carriageinward waspaid inrespect of goods bought in December
2004
6. Stockwith a cost value of 295/= had stayed in storefor too long and
estimated tohave realizablevalue of only 178/=.
7. Goods costing 126 were returned to a supplier on 30th December
2004 but thecredit note was received four days later.
8. No recordshave been madeof drawingsinthe form of goods by the
owner of thisbusiness, W. Mahwa of 203.
9. The usual gross profit marginis33% on cost.
Calculatethe cost, net realizablevalue whichever is the lowest of the
stock of 31st December 2004.
INSURANCE CLAIM
ILLUSTRATION 1
J.A has insured a stockfor 10,000/=. On31st March 2008when the total
cost value of stockin his store was 12,000, hisstore caught fire, the value of
stock salvaged from firewas 3,000/=. Calculatethe amount he canclaim
from the insurancecompany.
NOTES
If stockis not fully insured, that is if the value of stockin store is more than
the sum insured, insurancecompanypaid thefollowing portionof the value
of stockdestroyed from fire
Insuranceclaim = 10,000 x 9,000
12,000
19. Insuranceclaim = 7,500
Owner J.A of the go down should claim 7,500 beforehis insurance
company.
ILLUSTRATION 2
Stockon 31st March 2005 (last year end) 6200/=
Debtorson 31st March 2005 was 4600/=
Creditorson 31st March 2005 was5400
Receipt from debtors(1st Aprilto 5th May) was 5700/=
Discount allowed to debtors 100/=
Discount received from creditors 180/=
Payment tocreditors 5120/=
Stockdonated to a charity(cost value) 340/=
Stock salvaged from fire 600/=
Gross profit margin25% cost
Calculate;
1. The cost value of stock in store on 5th May2005 considering that on
that day debtorsamounted to6500 and creditorsto 4900.
2. The amount to be claimed from insurancecompany
Solution; Exercise 2.
STOCK AS AT 28TH DECEMBER 2004
WORKINGS
NOTE (i)
20. Sort out all itemsconcerning with sales
Cash sales 1940
Credit sales 3400
5340
Less; goods not delivered 280
5060
Less; damaged value 36
Net sales 5024
5024 x 75% = 3768
Add; cost before damage 42
COGS 3810
NOTE (ii)
Stockwith a cost value = 295
Less; Realizablevalue = (178)
Loss in value of stock 117
ESTIMATION OF STOCK
Stockas at 28th December
2004 73,200
Add; purchases
23
10
Carriageinwards
42
5
(80 x 75%) 60
Cost of value of Returninwards
21. (220 x
75%)
16
5
2960
76,160
Less; cost of goods sold .(note
(i))
38
10
Returnoutwards
12
6
Returnoutward book
value
17
0
Drawings
20
3
Loss value in stock (note
(ii))
117 -4426
Closingstock
71743