Example about subsidiary ledger using FIFO-LIFO-Weighted Average-ch.

8
FIFO
ABC Company uses the perpetual inventory system. It records purchases at gross invoice and sales at its
full invoice price. During January, the company had the following purchases and sales of mobile phones:

Jan. 1 Purchased from Samsung Co. 100 units @ $80/unit n/30.

Jan. 3 Purchased 200 units from Apple Co. at $75/unit 2/10,n/30.
Jan.4 20 units were returned to Apple Co
Jan.10 Sold 150 units to XYZ Co @ $100 / unit terms 2/10,n/30.
Jan.11 XYZ Co returned 60 units because they were defective
Jan.20 Collected the account receivables of XYZ Co
Jan.30 Paid the amount due to Apple Co.
Jan.30 A physical count showed that 185 mobile phones are still on hand.

Let’s prepare the subsidiary ledger card (Using FIFO Method)

Purchases Sales Balance
DATE Q UC TC Q UC COGS Q UC TC
Jan. 1 100 $80 $8,000 100 $80 $8000

100 $80
3 200 $75 $ 15,000 200 75 $23,000

100 $80
4 (20) $75 ($1,500) 180 75 $21,500

100 $80
10 50 $75 $11,750 130 $75 $9,750

(50) $75 ($4,550) 10 $80

11 (10) 80 180 $75 $14,300

$13,900
5 $80 (End.Inventory
30 5 $80 $400 180 $75 )
Total COGS=
$7,600

Now Let’s record the entries for the above events using FIFO method:

Jan 1 Inventory 8,000

A/P 8,000

Jan 3 Inventory 15,000

A/P 15,000
Jan 4 A/P 1,500
Inventory 1,500

Jan 10 A/R 15,000

Sales 15,000
150 units x
$100 (the
selling price) = $15,000
Jan 10 Cost of Goods Sold 11,750
Inventory 11,750

Jan 11 Sales Returns and Allowances $6,000

A/R 6,000
(60x$100
selling price)
Jan 11 Inventory $4,550
COGS $4,550

Jan 20 Sales Discounts $180

Cash($9,000
x 0.98) 8,820
A/R $9,000

A/P(15000-
Jan 30 1500) 13,500
Cash 13,500

Jan 30 Cost of Goods Sold $400

Inventory $400

(Below find same example but using LIFO)

LIFO
ABC Company uses the perpetual inventory system. It records purchases at gross invoice and sales at its
full invoice price. During January, the company had the following purchases and sales of mobile phones:

Jan. 1 Purchased from Samsung Co. 100 units @ $80/unit n/30.

Jan. 3 Purchased 200 units from Apple Co. at $75/unit 2/10,n/30.
Jan.4 20 units were returned to Apple Co
Jan.10 Sold 150 units to XYZ Co @ $100 / unit terms 2/10,n/30.
Jan.11 XYZ Co returned 60 units because they were defective
Jan.20 Collected the account receivables of XYZ Co
Jan.30 Paid the amount due to Apple Co.
Jan.30 A physical count showed that 185 mobile phones are still on hand.

Let’s prepare the subsidiary ledger card (Using LIFO Method)

Purchases Sales Balance
DATE Q UC TC Q UC COGS Q UC TC
Jan. 1 100 $80 $8,000 100 $80 $8000

100 $80
3 200 $75 $ 15,000 200 75 $23,000

100 $80
4 (20) $75 ($1,500) 180 75 $21,500

150 $75 100 $80

10 $11,250 30 $75 $10,250

(60) $75 ($4,500) 100 $80

11 90 $75 $14,750

$14,375
100 $80 (End.Inventory
30 5 $75 $375 85 $75 )
Total COGS=
$7,125

Now Let’s record the entries for the above events using LIFO method:

Jan 1 Inventory 8,000

A/P 8,000

Jan 3 Inventory 15,000

A/P 15,000
Jan 4 A/P 1,500
Inventory 1,500

Jan 10 A/R 15,000

Sales 15,000
150 units x
$100 (the
selling price) = $15,000
Jan 10 Cost of Goods Sold 11,250
Inventory 11,250

Jan 11 Sales Returns and Allowances $6,000

A/R 6,000
(60x$100)
Jan 11 Inventory $4,500
COGS $4,500

Jan 20 Sales Discounts $180

Cash($9,000
x 0.98) 8,820
A/R $9,000

A/P(15000-
Jan 30 1500) 13,500
Cash 13,500

Jan 30 Cost of Goods Sold $375

Inventory $375
Weighted average
ABC Company uses the perpetual inventory system. It records purchases at gross invoice and sales at its
full invoice price. During January, the company had the following purchases and sales of mobile phones:

Jan. 1 Purchased from Samsung Co. 100 units @ $80/unit n/30.

Jan.2 20 units were returned to Samsung Co.
Jan. 3 Purchased 200 units from Apple Co. at $75/unit 2/10,n/30.
Jan.10 Sold 150 units to XYZ Co @ $100 / unit terms 2/10,n/30.
Jan.11 XYZ Co returned 60 units because they were defective
Jan.20 Collected the account receivables of XYZ Co
Jan.30 A physical count showed that 185 mobile phones are still on hand.

Average cost=Total cost/total number of units= (6,400+15,000)/(80 +200)=$76.428

Let’s prepare the subsidiary ledger card (Using weighted Method)

Purchases Sales Balance
DATE Q UC TC Q UC COGS Q UC TC
Jan. 1 100 $80 $8,000 100 $80 $8000

2 (20) $80 ($1,600) 80 $80 $6,400

3 200 $75 $ 15,000 280 $76.428 $21,400

150
10 $76.428 $11,464 130 $76.428 $9,936

(60) ($4,586)
11 $76.428 190 $76.428 $14,521

$14,139
30 5 $76.428 $382 185 $76.428 (End.Inventory)
Total COGS=
$7,260

Now let’s record the entries for the above events using weighted average method:

Jan 1 Inventory 8,000

A/P 8,000

Jan 2 A/P 1,600

Inventory 1,600
 15,000
Jan 3 Inventory
A/P 15,000
Jan 10 A/R 15,000
Sales 15,000
150 units x
$100 (the
selling price) = $15,000
Jan 10 Cost of Goods Sold 11,464
Inventory 11,464

Jan 11 Sales Returns and Allowances $6,000

A/R 6,000
(60x$100)
Jan 11 Inventory $4,586
COGS $4,586

Jan 20 Sales Discounts $180

Cash($9,000
x 0.98) 8,820
A/R $9,000

Jan 30 Cost of Goods Sold $382

Inventory $382

Below are 2 empty subsidiary ledger cards for your practice

Date Purchases Sales Balance

Jan. Q UC TC Q UC COGS Q UC TC
1

Date Purchases Sales Balance

Jan. Q UC TC Q UC COGS Q UC TC
1