CHAPTER NINETEEN APPENDIX PERPETUAL INVENTORY: LIFO AND MOVING-AVERAGE METHODS

PERPETUAL INVENTORY METHODS Costs are computed every time merchandise is purchased or sold. FIFO - covered in chapter 19 LIFO - When inventory is sold, we assume that the most recently purchased layer is sold first. MOVING-AVERAGE - Every time inventory is purchased, a new average cost per unit is calculated.

There are 200 units in inventory at the beginning of the year. PERPETUAL LIFO METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) There are 200 units in inventory at the beginning of the year.

PERPETUAL LIFO METHOD Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00

PERPETUAL LIFO METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450

PERPETUAL LIFO METHOD Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00 (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 (4) 300 1.50 450.00 $650.00

PERPETUAL LIFO METHOD Sold 400 units Date Purchases Cost of Goods Sold Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450 June 20 Sold 400 units

PERPETUAL LIFO METHOD LIFO starts with the most recently purchased….. Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00 (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 (4) 300 1.50 450.00 $650.00 LIFO starts with the most recently purchased….. Layer 4 completely sold, layer 3 completely sold, layer 2 80 sold

PERPETUAL LIFO METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450 June 20 300 $1.50 $450 20 1.20 24 80 1.00 80 $554.00

PERPETUAL LIFO METHOD Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00 (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 (4) 300 1.50 450.00 $650.00 300 $1.50 $450 (1) 20 $ .80 $ 16.00 20 1.20 24 (2) 80 1.00 80.00 80 1.00 80 $554.00 $96.00

PERPETUAL LIFO METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450 June 20 300 $1.50 $450 20 1.20 24 80 1.00 80 $554.00 June 30 100 $1.80 $180

PERPETUAL LIFO METHOD Cost of Goods Sold for June Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00 (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 (4) 300 1.50 450.00 $650.00 300 $1.50 $450 (1) 20 $ .80 $ 16.00 20 1.20 24 (2) 80 1.00 80.00 80 1.00 80 $554.00 $96.00 (1) 20 $ .80 $ 16.00 Cost of Goods Sold for June (2) 80 1.00 80.00 (5) 100 1.80 180.00 $276.00

PERPETUAL LIFO METHOD June 30 Ending Inventory Cost of Goods Sold Inventory on Hand Cost/ Cumulative Cost/ Layer Units Unit CGS CGS Layer Units Unit Cost Total (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 $200.00 (1) 20 $ .80 $ 16.00 (2) 160 1.00 160.00 (3) 20 1.20 24.00 (4) 300 1.50 450.00 $650.00 300 $1.50 $450 (1) 20 $ .80 $ 16.00 20 1.20 24 (2) 80 1.00 160.00 80 1.00 80 $554.00 $96.00 (1) 20 $ .80 $ 16.00 (2) 80 1.00 160.00 June 30 Ending Inventory (5) 100 1.80 180.00 $276.00

PERPETUAL MOVING-AVERAGE METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) There are 200 units in inventory at the beginning of the year.

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 Cost / # of units $200/200 = $1/unit

PERPETUAL MOVING-AVERAGE METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 $200 in inventory + $450 just purchased = $650

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 200 units in inventory + 300 just purchased = 500

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 $650/500units = $1.30/unit

PERPETUAL MOVING-AVERAGE METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450 June 20 400 $1.30 $520 $520.00 Cost of the units sold is the $1.30/unit

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 400 $1.30 $520 $520.00 (520) 130.00 100 1.300 Cost per unit is still $1.30

PERPETUAL MOVING-AVERAGE METHOD Date Purchases Cost of Goods Sold Cost/ Cost/ Cumulative Units Unit Total Units Unit CGS CGS Jan. 1 (BI) June 4 300 $1.50 $450 June 20 400 $1.30 $520 $520.00 June 30 100 1.80 180

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 400 $1.30 $520 $520.00 (520) 130.00 100 1.300 180 A purchase….need to calculate new per unit cost

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 400 $1.30 $520 $520.00 (520) 130.00 100 1.300 180 310.00 200 1.550 $310/200units = $1.55/unit

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 400 $1.30 $520 $520.00 (520) 130.00 100 1.300 180 310.00 200 1.550 June’s Cost of Goods Sold

PERPETUAL MOVING-AVERAGE METHOD Cost of Goods Sold Inventory on Hand Cost of Cost of Average Cost/ Cumulative Purchase Inventory Units Cost/ Units Unit CGS CGS or (Sale) on Hand on Hand Unit $ 200.00 200 $1.000 $450 650.00 500 1.300 400 $1.30 $520 $520.00 (520) 130.00 100 1.300 180 310.00 200 1.550 June 30 Ending Inventory