Prepared By:

Muhammad Usman Hamid. Muhammad Farhan Abbas

Zain-ul-Habib.

Merchandise

inventory

Items requiring special

includes all goods that a

company owns and holds for

attention include:
Goods on Consignment Goods in Transit

sale, regardless of where the

goods are located when
Goods Damaged

inventory is counted.

FOB Shipping Point Public Seller Carrier Buyer

Ownership passes to the buyer here. Public Carrier Seller

FOB Destination Point Buyer

 Include all expenditures necessary to bring an item

to a salable condition and location.
Minus Discounts and Allowances

Invoice Cost
Plus Freight

Plus Insurance

Plus Import Duties

Plus Storage

Accounting for inventory requires several decisions . . .

Costing Method
Specific Identification, FIFO, LIFO,

or Weighted Average

Inventory System
Perpetual or Periodic

LIFO

FIFO

Other*

Weighted Average

46%
30%

20%

4%

First-In, First-Out (FIFO) Last-In, First-Out (LIFO) Weighted Average

Assumes costs flow in the order incurred. Assumes costs flow in the reverse order incurred. Assumes costs flow at an average of the costs available.

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 @ 15 @ $ 91 = $ 910 $ 106 = $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

728

8 @ 12 @ 20 @ 10 @ $ 115 = $ 119 = $ 1,190 3 @

91 =

$ 106 =

$ 1,272

On August 1st the company $ 2,300

$ 106 = $ 115 = $

$ 500 purchased 10 $ 2,800 $ 3,990

318

2 182 units of goods @ $ 91 $91$ each, and on costing =

August

3rd

the @ $ 119 = purchased 1,404 4 company $ 476 $ more

14 @

$ 1,610

15 units of goods costing $106 each.

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 8 12 20 10 @ @ $ 115 $ 119 = = $ 2,300 $ 1,190 2 14 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

728

@ @

$ 91 $ 106

= =

$ 1,272

$ 500 $ 2,800 $ 3,990

@ @

$ 91 $ 115

= =

182

On August 14 the company sold 20 units@ goods for $2000. 3 of $ 106 = $ 318
$ 1,610 4 @ $115 = Additional purchases of 20 units of goods at $ 119 were $ 476 on August made $ 1,404

17 costing $2300 in total, whereas the company made additional purchases of 10 units of goods at $119 on August 28 costing $1190 in total.

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 15 @ @ $ 91 = = $ 910 8 12 20 10 @ @ $ 115 $ 119 = = $ 2,300 $ 1,190 2 3 15 3 $ 106 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

728

@ @

91

= =

$ 106

$ 1,272

$ $ $

500 2,800 3,990

@ @ @ @

91

= = = =

$ $ $

182 318 357

$ 106 $ 115 $ 119

$ 1,725

1,408

Cost of Goods Sold for August 31 = $2,582

On August 31, 23 units of goods were sold costing $2582 in total.

Here are the entries to record the purchases and sales. The numbers in red are determined by the cost flow assumption used. All purchases and sales are made on credit. The selling price of inventory was as follows:
Aug. 3 Aug. 14 Aug. 14 Aug. 17 Aug. 28 Aug. 31 Aug. 31 Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory Merchandise inventory Accounts payable Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory 1,590 1,590 2,600 2,600 2,000 2,000 2,300 2,300 1,190 1,190 3,450 3,450 2,582 2,582

8/14 $130 8/31 150

Date Aug. 1 Aug. 3

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

Aug. above 20 @ $ 115made in August. The 17 purchases were = $ 2,300 Aug. 28 10 the company sold 20 bikes. On August 14, @ $ 119 = $ 1,190 Aug. 31

$ 2,300 $ 3,490
5 18 @ @ $ 106 $ 115 = = $ 530 $ 2,070

890

Fifo
Presented by: Muhammad Farhan Abbas.

Date Aug. 1 Aug. 3 Aug. 14

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 10 10 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

910

@ @

$ 91 $ 106

= =

$ 1,060

Aug. 17 20 @ $ 115 = $ 2,300 Aug. Cost of Goods 1,190 The 28 10 @ $ 119 = $Sold Aug. 31

for the August 14

5 18 @ @ $ 106 $ 115 = = $ 530 $ 2,070

$ 530 $ 2,830 $ 4,020 sale is $ 1,420

$1,970.
After 5 @ $106

this

sale,

there

are

five

units

in

inventory

at

$530:

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 10 10 20 10 @ @ $ 115 $ 119 = = $ 2,300 $ 1,190 5 18 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

910

@ @

$ 91 $ 106

= =

$ 1,060

$ 530 $ 2,830 $ 4,020 $ 1,420

@ @

$ 106 $ 115

= =

530

$ 2,070

Cost of Goods Sold for August 31 = $2,600

Date Aug. 1 Aug. 3 Aug. 14

Purchases
10 15 @ @ $ 91 = = $ 910 10 10 $ 2,300 $ 1,190 5 18 $ 106 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

910

@ @

91

= =

Income Aug. 17 20 @ $ 115 = Aug. 28 10 COGS Statement @ $ 119 = Aug. 31 $4,570 =

$ 106

$ 1,060

$ 530 $ 2,830 $ 4,020 $ 1,420

@ @

$ 106 $ 115

= =

530

$ 2,070

Balance Sheet Inventory = $1,420

Here are the entries to record the purchases and sales entries. The numbers in red are determined by the cost flow assumption used. All purchases and sales are made on credit. The selling price of inventory was as follows:
Aug. 3 Aug. 14 Aug. 14 Aug. 17 Aug. 28 Aug. 31 Aug. 31 Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory Merchandise inventory Accounts payable Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory 1,590 1,590 2,600 2,600 1,970 1,970 2,300 2,300 1,190 1,190 3,450 3,450 2,600 2,600

8/14 $130 8/31 150

Date Aug. 1 Aug. 3 Aug. 14

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 15 $ 115 $ 119 = = $ 2,300 $ 1,190 10 13 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

455

$ 106

= =

$ 1,590 $

5 @ $ The above purchases were made91

Aug. 17 20 @ Aug. 28 10 @ in August. Aug. 31

$ 455 $ 2,755 $ 3,945 $ 1,260

@ @

$ 119 $ 115

= =

$ 1,190 $ 1,495

On August 14, the company sold

20 bikes.

Date Aug. 1 Aug. 3 Aug. 14

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 15 5 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

455

@ @

$ 106 $ 91

= =

$ 1,590 $

Aug. 17 20 @ $ 115 = $ 2,300 Aug. Cost of 119 = The 28 10 @ $Goods$ 1,190 for the August Sold Aug. 31 10 @ $ 119 = $ 1,190

$ 455 $ 2,755 3,945 14 $sale is $ 1,260

$2,045.

13

$ 115

$ 1,495

After this sale, there are five units in inventory at $455: 5 @ $91

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 15 @ @ $ 91 $ 106 = = $ 910 15 5 20 10 @ @ $ 115 $ 119 = = $ 2,300 $ 1,190 10 13 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

455

@ @

$ 106 $ 91

= =

$ 1,590 $

$ 455 $ 2,755 $ 3,945 $ 1,260

@ @

$ 119 $ 115

= =

$ 1,190 $ 1,495

Cost of Goods Sold for August 31 = $2,685

Date Aug. 1 Aug. 3 Aug. 14

Purchases
10 15 @ @ $ 91 = = $ 910 15 5 $ 2,300 $ 1,190 10 13 $ 106 $ 1,590

Cost of Goods Sold

Inventory Balance $ 910 $ 2,500

455

@ @

$ 106 $ 91

= =

$ 1,590 $

Income Aug. 17 20 @ $ 115 = Statement COGS Aug. 28 10 @ $ 119 = = Aug. 31 $4,730

$ 455 $ 2,755 $ 3,945 $ 1,260

@ @

$ 119 $ 115

= =

$ 1,190 $ 1,495

Balance Sheet Inventory = $1,260

Here are the entries to record the purchases and sales entries. The numbers in red are determined by the cost flow assumption used. All purchases and sales are made on credit. The selling price of inventory was as follows: 8/14 $130 8/31 150
Aug. 3 Aug. 14 Aug. 14 Aug. 17 Aug. 28 Aug. 31 Aug. 31 Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory Merchandise inventory Accounts payable Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory 1,590 1,590 2,600 2,600 2,045 2,045 2,300 2,300 1,190 1,190 3,450 3,450 2,685 2,685

Presented By:
Zain-ul-Habib

When a unit is sold, the average cost of each unit in inventory is assigned to cost of goods sold.
Cost of Units on Goods hand on the Available for date of sale Sale

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Inventory Balance Purchases Cost of Goods Sold 10 @ $ 91 = $ 910 $ 910 15 @ $ 106 = $ 1,590 $ 2,500 500 First, we need to compute the 20 @ $ average cost per unit weighted 100 = $ 2,000 $ 20 @ $ 115 = $ 2,300 $ 2,800 of items in inventory. 10 @ $ 119 = $ 1,190 $ 3,990 Cost of goods available for sale $ 2,500 23 @ $ 114 = $ 2,622 $ 1,368 Total units in inventory 25
Weighted average cost per unit $

100

The Cost of Goods Sold for the August 14 sale is $2,000.

After this sale, there are five units in inventory at $500:

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 @ 15 @ 20 @ 10 @ $ 91 = $ $ $ $ 910 1,590 $ 106 = $ 115 = $ 119 =

Cost of Goods Sold

20 @ 2,300 1,190 23 @

$ 100 =

2,000

$ 114 =

2,622

Inventory Balance $ 910 $ 2,500 $ 500 $ 2,800 $ 3,990 $ 1,368

Additional purchases were made on August 17 and 28. Twenty-three bikes were sold on August 31.

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 @ 15 @ 20 @ 10 @ $ 91 = $ $ $ $ 910 1,590 $ 106 = $ 115 = $ 119 =

Cost of Goods Sold

20 @ 2,300 1,190 23 @

$ 100 =

2,000

$ 114 =

2,622

Inventory Balance $ 910 $ 2,500 $ 500 $ 2,800 $ 3,990 $ 1,368

$ 3,990 35 $ 114

Units Inventory 8/14 5 Purchase 8/17 20 Purchase 8/28 10 Units available for sale 35

Cost of goods available for sale Total units in inventory Weighted average cost per unit

Date Aug. 1 Aug. 3 Aug. 14 Aug. 17 Aug. 28 Aug. 31

Purchases
10 15 20 10 @ $ 91 @ $ 106 @ $ 115 @ $ 119 = $ 910 = $ 1,590 = $ 2,300 = $ 1,190

Inventory Balance Cost of Goods Sold $ 910 $ 2,500 20 @ $ 100 = $ 2,000 $ 500 $ 2,800 $ 3,990 23 @ $ 114 = $ 2,622 $ 1,368

Cost of Goods Sold for August 31 = $2,622

Ending

inventory

is

comprised of 12 units @ an

average cost of $114 each or

$1,368.

Date Purchases Aug. 1 10 @ $ 91 = Aug. 3 15 @ $ 106 = Aug. 14 Aug. 17 Income115 = 20 @ $ Statement COGS Aug. 28 10 @ $ 119 = Aug. 31 = $4,622

910

$ 1,590 $ 2,300 $ 1,190

Inventory Balance Cost of Goods Sold $ 910 $ 2,500 20 @ $ 100 = $ 2,000 $ 500 $ 2,800 $ 3,990 23 @ $ 114 = $ 2,622 $ 1,368

Balance Sheet Inventory = $1,368

Here are the entries to record the purchases and sales entries for
Trekking. The numbers in red are determined by the cost flow assumption used.

All purchases and sales are made on credit. The selling price of inventory was as follows:
8/14 $130 8/31 150

Aug. 3 Aug. 14 Aug. 14 Aug. 17 Aug. 28 Aug. 31 Aug. 31

Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory Merchandise inventory Accounts payable Merchandise inventory Accounts payable Accounts receivable Sales Cost of goods sold Merchandise inventory

1,590 1,590 2,600 2,600 2,000 2,000 2,300 2,300 1,190 1,190 3,450 3,450 2,622 2,622