Chapter 11: Inventory Cost Flow
PAS 2, paragraph 25, expressly provides that the cost of inventories shall be dete
a. First in, First out
b. Weighted average
First in, first out, FIFO method assumes that the goods first purchased are first s
the goods remaining in the inventory at the end of the period are those most recen
Weighted average method, the cost of the beginning inventory plus the total cost o
is divided by the total units purchased plus those in the beginning inventory to ge
Weighted ave. unit cost = Total cost of goods available for
Total number of units available
Ji Company is a wholesaler of magnets. The activity for product "Magnet X" duri
Date Transaction Units Unit cost Total cost
Aug-01 Inventory 2,000 P36.00 P72,000
Aug-07 Purchase 3,000 P37.20 111,600
Aug-12 Sales 4,200
Aug-13 Sales Returns 600
Aug-21 Purchase 4,800 P38.00 182,400
Aug-22 Sales 3,800
Aug-29 Purchase 1,900 P38.60 73,340
Aug-30 Purchas returns 300 P38.60 (11,580)
Total goods available for sale P427,760
Requirements: Compute for (a) ending inventory and (b) cost of goods sold under th
1. FIFO - periodic
2. FIFO - perpetual
3. Weighted average - periodic
4. Weighted average - perpetual
tories shall be determined by using either:
urchased are first sold and consequently
are those most recently purchased or produced.
plus the total cost of purchases during the period
ing inventory to get a weighted average unit cost.
goods available for sale
of units available for sale
1. FIFO Periodic
ct "Magnet X" during August is shown below:
oods sold under the following cost formulas:
FO Periodic
Units Total cost
Inventory, beg 2000
Add: Net purchases 9400
Total goods available for sale 11400 427760
Less: Cost of goods sold -7400 274800
Ending inventory 4,000 152960
4,000 Ending inventory units Units Unit cost Total cost
from aug 29 net purchases 1600 38.6 61760
from aug 21, purchase 2400 38 91200
4000 152960
2. FIFO PERPETUAL
Date Transaction Units
Aug-01 Beg inventory 2,000
Aug-07 Purchase 3,000
Aug-12 Net sales 3,600
from Aug 1, beg inv - 2,000
from Aug 7 purchase - 1,600
Aug-21 Purchase 4,800
Aug-22 SALES 3,800
from Aug 7, purchase - 1,400
from Aug 21, purchase - 2,400
Aug-29 Net purchases 1,600
4,000
TGAS 427,760
Less: EI - 152,960
COGS 274,800
3. WEIGHTED AVERAGE - PER
Unit Cost Total Cost
36 72,000 weighted ave unit cost
37.2 111,600
36 - 72,000
37.2 - 59,520
38 182,400
Ending inventory = 4,0
37.2 - 52,080
38 - 91,200 TGAS
38.60 61,760 Less: EI
152,960 COGS
VERAGE - PERIODIC
TGAS in pesos
hted ave unit cost TGAS in units
427760
11400
37.52
ng inventory = 4,000 x 37.52 = 150080
427760
150080
277680
4. MOVING AVERAGE ( Weighted average - perpetual)
Date Transaction Units
Aug-01 Beg inventory 2,000
Aug-07 Purchase 3,000
Moving ave unit cost 5,000
Aug-12 Sales - 4,200
Moving ave unit cost 800
Aug-13 Sales returns 600
Moving ave unit cost 1,400
Aug-21 Purchase 4,800
Moving ave unit cost 6,200
Aug-22 Sales - 3,800
Moving ave unit cost 2,400
Aug-29 Purchase 1,900
Moving ave unit cost 4,300
Aug-30 Purchase returns - 300
Moving ave unit cost 4,000
154,224
- 22,032
143,298
COGS 275,490
Unit cost Total Cost
36 72,000
37.2 111,600
36.72 183,600
36.72 - 154,224
36.72 29,376
36.72 22,032
36.72 51,408
38 182,400
37.71 233,808
37.71 - 143,298
37.71 90,510
38.6 73,340
38.1 163,850
38.6 - 11,580
38.07 152,270
