Inventory Valuation

1
Inventory Valuation
Chapter 8...

2
Major Methods of Valuation

• Specific Identification
• FIFO
• LIFO
• Weighted Average
• Standard

3
Comparison...
Purchase 100 at 75 each
75
75
75
FIFO
LIFO
WtdAvg
4
Comparisons
Purchase another 130 at 80 apiece
80
80
80
75
75
75
FIFO
LIFO
WtdAvg
5
Comparison...
Purchase another 150 at 85 apiece
85
85
85
80
80
80
75
75
75
FIFO
LIFO
WtdAvg
6
Comparisons
Sell 40
85
85
85
80
80
80
75
75
75
FIFO
LIFO
WtdAvg
7
Comparisons
85
85
85
80
80
80
75
75
75
FIFO
LIFO
WtdAvg
8
Comparisons...
Sell another 70
85
85
85
80
80
80
75
75
75
FIFO
LIFO
WtdAvg
9
Comparisons...
85
85
85
80
80
80
75
75
FIFO
LIFO
WtdAvg
10
Purchase More...
81
Purchase another 120 for 81 apiece
81
85
85
81
85
80
80
80
75
75
FIFO
LIFO
WtdAvg
11

• Walk-Through Numerical Example

12
Purchase Events...

• Purchased 100 widgets at 10 each.
• Purchased 50 widgets at 12 each.

13
Beginning Inventory Valuation

• FIFO 100 at 10 (1000) plus 50 at 12 (600)
  TOTAL 1600
• LIFO 100 at 10 (1000) plus 50 at 12 (600)
  TOTAL 1600
• Wtd Avg 150 at 10.667, TOTAL 1600

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Sell 20 widgets for 15 each

• FIFO Sold 20 at 10 each
• LIFO Sold 20 at 12 each
• Wtd Avg Sold 20 at 10.667 each

COST OF GOODS SOLD
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Cost of Goods Sold

• FIFO 200
• LIFO 240
• Wtd Avg 213.33

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Gross Margin...

• FIFO 300 - 200 100
• LIFO 300 - 240 60
• Wtg Avg 300 - 213.33 86.667

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Inventory Valuation

• FIFO 1600 - 200 1400
• LIFO 1600 - 240 1360
• Wtd Avg 1600 - 213.33 1386.667

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Ending Inventory Valuation

• FIFO 80 at 10, 50 at 12 1400
• LIFO 100 at 10, 30 at 12 1360
• Wtd Avg 130 at 10.667 1386.667

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Purchase 100 more at 11

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Inventory Valuation

• FIFO 80 at 10, 50 at 12, 100 at 11 TOTAL
  2500
• LIFO 100 at 10, 30 at 12, 100 at 11 TOTAL
  2460
• Wtd Avg 230 at 10.81
  TOTAL 2486

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Sell 30 .

• FIFO 80 at 10, 50 at 12, 100 at 11 TOTAL
  2500
• LIFO 100 at 10, 30 at 12, 100 at 11 TOTAL
  2460
• Wtd Avg 230 at 10.81
  TOTAL 2486

FIFO Sell 30 at 10
22

• FIFO 80 at 10, 50 at 12, 100 at 11 TOTAL
  2500
• LIFO 100 at 10, 30 at 12, 100 at 11 TOTAL
  2460
• Wtd Avg 230 at 10.81
  TOTAL 2486

LIFO Sell 30 at 11
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Sell 30 ...

• FIFO 80 at 10, 50 at 12, 100 at 11 TOTAL
  2500
• LIFO 100 at 10, 30 at 12, 100 at 11 TOTAL
  2460
• Wtd Avg 230 at 10.81
  TOTAL 2486

Wtd Avg Sell 30 at 10.81
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After selling 30, Ending Balance

• FIFO 50 at 10, 50 at 12, 100 at 11 TOTAL
  2200
• LIFO 100 at 10, 30 at 12, 70 at 11 TOTAL
  2130
• Wtd Avg 200 at 10.81
  TOTAL 2162

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For Wednesday..

• Read Chapter 9