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Chapter 6 Inventories Lecture 27. Lecture Overview.

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Presentation on theme: "Chapter 6 Inventories Lecture 27. Lecture Overview."— Presentation transcript:

1 Chapter 6 Inventories Lecture 27

2 Lecture Overview

3 Cost Flow Assumptions (contd.) 1.First-In, First Out (FIFO) method. 2.Last-in, First-Out (LIFO) method. 3.Weighted-Average Cost method. 4.Specific Identification method.

4 PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost

5 Cost of Mdse. Sold

6

7 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200

8 Cost of Mdse. Sold

9 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 Jan. 11020200

10 Cost of Mdse. Sold

11 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 Because the purchase price of 21 is different than the cost of the previous 3 units on hand, the inventory balance of 11 units is accounted for separately.

12 Cost of Mdse. Sold

13 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 2232060 12121721147 Of the four units sold, three are from the first units in (fifo) at a cost of 20.

14 Cost of Mdse. Sold

15 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 2232060 12121721147 2822142521105

16 Cost of Mdse. Sold

17 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 2232060 12121721147 2822142521105 301022220521105 1022220 Totals183881326315325

18

19 Fifo Periodic

20 Jan. 1Beginning Inventory 200 units @ Rs.9 Mar. 10 Purchase 300 units @ Rs.10 400 units @ Rs.11 Sept. 21 Purchase 100 units @ Rs.12 Nov. 18 Purchase 1,000 units available for sale during year

21 200 units @ Rs.9 300 units @ Rs.10 400 units @ Rs.11 100 units @ Rs.12 1,000 units available for sale during year Rs. Rs.10,400 Rs. =Rs.1,800Jan. 1 = 3,000Mar. 10 =4,400Sept. 21 =1,200Nov. 18 Cost of merchandise available for sale

22 A physical count on December 31 reveals that 700 of the 1,000 units have been sold. Using fifo, the first units purchased are theoretically the first units sold. We begin the count with January 1.

23 200 units @ $9 300 units @ $10 400 units @ $11 100 units @ Rs.12 1,000 units available for sale during year $10,400 =$1,800Jan. 1 = 3,000Mar. 10 =4,400Sept. 21 =1,200Nov. 18 Sold these 200 Sold these 300 Sold 200 of these 200 units @ Rs.11 Rs. =Rs. 0Jan. 1 = 0Mar. 10 =2,200Sept. 21 Rs. Rs. 3,400 Ending inventory

24

25 Jan. 1 200 units at Rs. 9 Summary of Fifo Periodic Mar. 10 300 units at Rs. 10 Sep. 21 400 units at Rs. 11 Nov. 18 100 units at Rs. 12 Rs. 1,800 Rs. 3,000 Rs.4,400 Rs.1,200 Purchases Merchandise Available for Sale Rs.1,800 Rs.3,000 Rs.2,200 Cost of Merchandise Sold 200 units at Rs. 9 Rs.10,40 0 Rs.2,200 Rs.1,200 Rs.7,000 Merchandise Inventory Rs.3,400 300 units at Rs. 10 200 units at Rs.11 100 units at Rs.12 1,000 units 700 units 300 units

26 Lecture Overview FIFO (Perpetual Inventory System) FIFO (Periodic Inventory System)

27 End of Lecture 27

28

29 Chapter 6 Inventories Lecture 28

30 Lecture Overview FIFO (Perpetual Inventory System) FIFO (Periodic Inventory System)

31

32 Cost of Mdse. Sold

33 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200

34 Cost of Mdse. Sold

35 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060

36 Cost of Mdse. Sold

37 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 Note that a new layer is formed.

38 Cost of Mdse. Sold

39 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 On January 22, the firm sells four units at $31 each. 224218432060 42184

40 Cost of Mdse. Sold

41 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 224218432060 42184 282214232060 22142

42 Cost of Mdse. Sold

43 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 224218432060 42184 282214232060 22142 30102222032060 22142 1022220

44 Cost of Mdse. Sold

45 Item 127B PurchasesCost of Mdse. SoldInventory Balance UnitTotalUnitTotalUnitTotal Date Qty.Cost Cost Qty.CostCost Qty.CostCost Jan. 11020200 472014032060 1082116832060 821168 224218432060 42184 282214232060 22142 30102222032060 22142 1022220 Totals183881326615322

46

47 Lifo Periodic

48 Jan. 1Beginning Inventory 200 units @ Rs.9 Mar. 10 Purchase 300 units @ Rs.10 400 units @ Rs.11 Sept. 21 Purchase 100 units @ Rs.12 Nov. 18 Purchase 1,000 units available for sale during year Using lifo, the most recent batch purchased is considered the first batch of merchandise sold.

49 Jan. 1Beginning Inventory 200 units @ Rs.9 Mar. 10 Purchase 300 units @ Rs.10 400 units @ Rs.11 Sept. 21 Purchase 100 units @ Rs.12 Nov. 18 Purchase 1,000 units available for sale during year Assume again that 700 units were sold during the year.

50 200 units @ Rs.9 300 units @ $10 400 units @ $11 100 units @ $12 1,000 units available for sale during year Sold these 100 Sold these 400 Sold 200 of these 100 units @ Rs.10 Rs. =Rs.1,800Jan. 1 = 3,000Mar. 10 =4,400Sept. 21 =1,200Nov. 18 $10,400 0 0 1,000 Ending Inventory Rs. Rs.2,800

51

52 Jan. 1 200 units at Rs. 9 Mar. 10 300 units at Rs.10 Sep. 21 400 units at Rs.11 Nov. 18 100 units at Rs.12 Rs.1,800 Rs.3,000 Rs.4,400 Rs.1,200 Rs.1,800 Rs.1,000 Cost of Merchandise Sold 200 units at Rs.9 10,400 Rs.10,400 Rs.4,400 Rs.1,200 Rs.2,800 Rs.7,600 100 units at Rs.10 200 units at Rs.10 400 units at Rs.11 100 units at Rs.12 Rs.2,000 700 units 1,000 units 300 units Purchases Merchandise Available for Sale Rs.1,800 Cost of Merchandise Sold

53 Lecture Overview LIFO (Perpetual Inventory System) LIFO (Periodic Inventory System)

54 End of Lecture 27

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