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Inventory Valuation 2

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5 views4 pages

Inventory Valuation 2

Uploaded by

abrianaanderson611
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INVENTORY VALUATION

CLOSING INVENTORY ARE GOODS IN A BUSINESS THAT HAS NOT YET BEEN SOLD AT THE END
OF A PERIOD (DAY, WEEKLY, FORTNIGHLY MONTHLY, YEARLY).

THERE ARE THREE MAIN METHODS OF CALCULATING INVENTORY VALUATION

 FIRST IN FIRST OUT METHOD (FIFO)- WHICH EVER GOODS ARE BOUGHT FIRST WILL BE
SOLD FIRST.

THE FIRST IN FIRST OUT METHOD


2017 RECEIVED ISSUED INVENTORY $ $
(PURCHASED) (SOLD) AFTER EACH
TRANSACTIO STOCK VALUE
N
January 10 x 30 each - 10 x 30 300 300

April 10 x 34 each - 10 x 30 300 640


10 x 34 340
May - 8 x 30 each 2 x 30 60
10 x 34 340 400
October 20 x 40 each - 2 x 30 60
10 x 34 340
20 x 40 800 1,200
November - 2 x 30 each
10 x 34 each 8 x 40 320 320
12 x 40 each

Closing Inventory = $320

NB: In November we sold 24 items


 LAST IN FIRST OUT METHOD (LIFO)- WHICH EVER GOODS ARE BOUGHT LAST WILL BE
SOLD FIRST.

THE LAST IN FIRST OUT METHOD


2017 RECEIVED ISSUED INVENTORY $ $
(PURCHASED) (SOLD) AFTER EACH
TRANSACTIO STOCK VALUE
N
January 10 x 30 each - 10 x 30 300 300

April 10 x 34 each - 10 x 30 300


10 x 34 340 640
May - 8 x 34 10 x 30 300
2 x 34 68
368
October 20 x 40 each - 10 x 30 300
2 x 34 68
20 x 40 800
1168
November - 20 x 40
2 x 34
2 x 30 8 x 30 240 240

Closing Inventory = $ 240

NB: In November we sold 24 items


 THE AVERAGE COST METHOD- WITH EACH RECEIPT OF GOODS THE AVERAGE COST FOR
EACH ITEM OF INVENTORY IS RECALCULATED.

THE AVERAGE COST METHOD


2017 RECEIVED ISSUED AVERAGE COST NUMBER OF TOTAL
(PURCHASED) (SOLD) PER UNIT OF UNITS IN VALUE OF
INVENTORY INVENTORY INVENTORY
HELD
$ $
January 10 x 30 each - 30 10 300
10 300
April 10 x 34 - + 10 +340

32 20 / 640

May - 8 x 32 32 x 12 = 384

12 x 32 = 384
October 20 x 40 - 20 x 40 800
37 32 / 1184

November - 24 x 37 37 8 x 37 296

Calculations: FINDING THE AVERAGE COST PER UNIT OF INVENTORY HELD

 April (10 X 30 + 10 X 34) = 300+340 = 640 / 20 = 32

 October (12 x 32 + 20 x40) = 384 + 800 = $1184/32= 37


Closing Stock = 296

NB: In November we sold 24 items

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