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7-1B - With Solution

This document provides an example of calculating inventory records using FIFO, LIFO, and weighted average costing methods. It includes a table of inventory transactions for Riverside Inc. in July showing purchases and sales. Requirements are to prepare inventory records using the three methods and compute sales, cost of goods sold, and gross profit for each. For the FIFO method, inventory is shown decreasing as older units are sold first. Calculations show a gross profit of $8,921 using FIFO. Weighted average costing also is explained to recalculate the average unit cost whenever inventory quantity changes.

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Anish Adhikari
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91 views3 pages

7-1B - With Solution

This document provides an example of calculating inventory records using FIFO, LIFO, and weighted average costing methods. It includes a table of inventory transactions for Riverside Inc. in July showing purchases and sales. Requirements are to prepare inventory records using the three methods and compute sales, cost of goods sold, and gross profit for each. For the FIFO method, inventory is shown decreasing as older units are sold first. Calculations show a gross profit of $8,921 using FIFO. Weighted average costing also is explained to recalculate the average unit cost whenever inventory quantity changes.

Uploaded by

Anish Adhikari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACCT 1000/2210 Module 7 – Class Presentation

7-1B – FIFO, LIFO and Weighted Average Inventory Records

Riverside Inc. uses a perpetual inventory system and reports the following transactions for the
month of July:

Date Explanation Units Cost/Price


July 1 Beginning inventory 12 $100.00
July 4 Purchase 8 103.00
July 9 Purchase 5 104.00
July 17 Sale 23 400.00
July 21 Purchase 6 107.00
July 31 Sale 7 400.00

Required:
a.) Prepare inventory records using:
i. The FIFO method
ii. The LIFO method (skip, not covered)
iii. The weighted average method
b.) Under each of the methods you prepared in part a.) above, compute Sales, Cost of
Goods Sold and Gross Profit.
Note:
LIFO inventory method prohibited under IFRS.
ACCT 1000/2210 Module 7 – Class Presentation

7-1B – FIFO, LIFO and Weighted Average Inventory Records


Part 1 & 2

a) i) FIFO
Date Purchases COGS Inventory
Quantity Unit Cost Total Quantity Unit Cost Total Quantity Unit Cost Total
July 1 12 100 1,200
July 4 8 103 824 12 100 1,200
8 103 824
July 9 5 104 520 12 100 1,200
8 103 824
5 104 520
July 17 12 100 1,200 2 104 208
8 103 824
3 104 312
July 21 6 107 642 2 104 208
6 107 642
July 31 2 104 208 1 107 107
5 107 535

b) Sales Revenue * $12,000


Cost of Goods Sold $3,079
Gross Profit $8,921

(*) Sales Revenue = (27 * $400) + (7 * $400) = $12,000

b) ii) LIFO – Not covered


ACCT 1000/2210 Module 7 – Class Presentation

7-1B – FIFO, LIFO and Weighted Average Inventory Records


Part 3

a) iii) Weighted Average

(*) When using the Weighted Average method, the average unit cost must be calculated by
adding the total dollar value paid for the inventory divided by the total quantity of inventory.
This is done whenever inventory quantity increases.

Note that rounding may alter amounts slightly.

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