Inventory

Inventory Accounting Methods

1- First in First Out (FIFO):

the method used to calculate the value of products or materials, in
which the first ones that are bought or produced are said to be the
first that are sold or used.
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
Jan 25
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
Jan 25 2 50 100
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
Jan 25 2 50 100
1 70 70
 First in First Out (FIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 - Purchased 5 bikes =$50 each,
January 5 - Sold 2 bikes
January 10 - Sold 1 bike
January 15 - Purchased 5 bikes = $70 each
January 25 - Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
Jan 25 2 50 100
1 70 70 4 70 280
 First in First Out (FIFO)
Example 2:
Use the following information to calculate the value of inventory on hand on March.
Mar 1 Beginning Inventory 68 units = $15.00 per unit
5 Purchase 140 units = $15.50 per unit
9 Sale 94 units = $19.00 per unit
11 Purchase 40 units = $16.00 per unit
16 Purchase 78 units = $16.50 per unit
20 Sale 116 units = $19.50 per unit
29 Sale 62 units = $21.00 per unit

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 First in First Out (FIFO)
Example 2:
Mar 1 Beginning Inventory 68 units = $15.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 First in First Out (FIFO)
Example 2:
Mar 1 Beginning Inventory 68 units = $15.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1
 First in First Out (FIFO)
Example 2:
Mar 1 Beginning Inventory 68 units = $15.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
 First in First Out (FIFO)
Example 2:
Mar 9 Sale 94 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9
 First in First Out (FIFO)
Example 2:
Mar 9 Sale 94 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
 First in First Out (FIFO)
Example 2:
Mar 9 Sale 94 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
 First in First Out (FIFO)
Example 2:
Mar 9 Sale 94 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
 First in First Out (FIFO)
Example 2:
Mar 11 Purchase 40 units = $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11
 First in First Out (FIFO)
Example 2:
Mar 11 Purchase 40 units = $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640
 First in First Out (FIFO)
Example 2:
Mar 11 Purchase 40 units = $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
 First in First Out (FIFO)
Example 2:
Mar 16 Purchase 78 units = $16.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16
 First in First Out (FIFO)
Example 2:
Mar 16 Purchase 78 units = $16.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287
 First in First Out (FIFO)
Example 2:
Mar 16 Purchase 78 units = $16.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
 First in First Out (FIFO)
Example 2:
Mar 20 Sale 116 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20
 First in First Out (FIFO)
Example 2:
Mar 20 Sale 116 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
 First in First Out (FIFO)
Example 2:
Mar 20 Sale 116 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
 First in First Out (FIFO)
Example 2:
Mar 20 Sale 116 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
 First in First Out (FIFO)
Example 2:
Mar 20 Sale 116 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
78 16.50 1,287
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 62 units = $21.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
78 16.50 1,287
Mar 29
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 62 units = $21.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
78 16.50 1,287
Mar 29 38 16 608
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 62 units = $21.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
78 16.50 1,287
Mar 29 38 16 608
24 16.50 396
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 62 units = $21.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 68 15 1,020
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 9 68 15 1,020
26 15.50 403
114 15.50 1,767
Mar 11 40 16 640 40 16 640
Mar 16 78 16.50 1,287 78 16.50 1,287
Mar 20 114 15.50 1,767
2 16 32
38 16 608
78 16.50 1,287
Mar 29 38 16 608
24 16.50 396 54 16.50 891
 Inventory Accounting Methods
2- Last in First Out (LIFO):
is an accounting inventory valuation method based on the principal
that the last asset acquired (the newest), is the first asset sold.
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Jan 25
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Jan 25 3 70 210
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Jan 25 3 70 210 2 50 100
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Jan 25 3 70 210 2 50 100
2 70 140
 Last in First Out (LIFO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Jan 25 3 70 210 2 50 100
2 70 140
4 240
 Last in First Out (LIFO)
Example 2:
Use LIFO on the following information to calculate the value of ending inventory and the
cost of goods sold of March.
Mar 1 Beginning Inventory 60 units =$15.00
5 Purchase 140 units = $15.50
14 Sale 190 units = $19.00
27 Purchase 70 units = $16.00
29 Sale 30 units = $19.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 Last in First Out (LIFO)
Example 2:

Mar 1 Beginning Inventory 60 units =$15.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1
 Last in First Out (LIFO)
Example 2:

Mar 1 Beginning Inventory 60 units =$15.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
 Last in First Out (LIFO)
Example 2:

Mar 5 Purchase 140 units = $15.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5
 Last in First Out (LIFO)
Example 2:

Mar 5 Purchase 140 units = $15.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170
 Last in First Out (LIFO)
Example 2:

Mar 5 Purchase 140 units = $15.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
 Last in First Out (LIFO)
Example 2:

Mar 14 Sale 190 units = $19.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14
 Last in First Out (LIFO)
Example 2:

Mar 14 Sale 190 units = $19.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
 Last in First Out (LIFO)
Example 2:

Mar 14 Sale 190 units = $19.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
 Last in First Out (LIFO)
Example 2:

Mar 14 Sale 190 units = $19.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
 Last in First Out (LIFO)
Example 2:

Mar 27 Purchase 70 units = $16.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27
 Last in First Out (LIFO)
Example 2:

Mar 27 Purchase 70 units = $16.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190
 Last in First Out (LIFO)
Example 2:

Mar 27 Purchase 70 units = $16.00

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190 70 16 1,120
 Last in First Out (LIFO)
Example 2:

Mar 29 Sale 30 units = $19.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190 70 16 1,120
Mar 29
 Last in First Out (LIFO)
Example 2:

Mar 29 Sale 30 units = $19.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190 70 16 1,120
Mar 29 30 16 480
 Last in First Out (LIFO)
Example 2:

Mar 29 Sale 30 units = $19.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190 70 16 1,120
Mar 29 30 16 480
10 15 150
 Last in First Out (LIFO)
Example 2:

Mar 29 Sale 30 units = $19.50

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
Mar 14 140 15.50 2,170
50 15 750
10 15 150
Mar 27 70 16 1,190 70 16 1,120
Mar 29 30 16 480
10 15 150
40 16 640
 Inventory Accounting Methods
3- Average Cost Method (AVCO):
Average cost is a cost accounting term that is sometimes referred to as unit cost or
weighted average cost. Average cost can refer to either average cost of inventory or
the average cost of units produced. Weighted Average Total Cost of Inventory
=
Unit Cost Total Units in Inventory
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
7 450
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Average Cost of inventory = 450/7=64.3 7 64.3 450
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Average Cost of inventory = 450/7=64.3 7 64.3 450
Jan 25
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Average Cost of inventory = 450/7=64.3 7 64.3 450
Jan 25 3 64.3 192.9
 Average Cost Method (AVCO)
Example 1:
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes = $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes = $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Jan 1 5 50 250 5 50 250
Jan 5 2 50 100 3 50 150
Jan 10 1 50 50 2 50 100
Jan 15 5 70 350 5 70 350
Average Cost of inventory = 450/7=64.3 7 64.3 450
Jan 25 3 64.3 192.9
4 64.3 257.2
 Average Cost Method (AVCO)
Example 2:
Use AVCO on the following information to calculate the value of ending inventory and the
cost of goods sold of March.
Mar 1 Beginning Inventory 60 units = $15.00 per unit
5 Purchase 140 units = $15.50 per unit
14 Sale 190 units = $19.00 per unit
27 Purchase 70 units= $16.00 per unit
29 Sale 30 units = $19.50 per unit

Date Purchase Sales Inventory

Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
 First in First Out (FIFO)
Example 2:
Mar 1 Beginning Inventory 60 units = $15.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1
 First in First Out (FIFO)
Example 2:
Mar 1 Beginning Inventory 60 units = $15.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
 First in First Out (FIFO)
Example 2:
Mar 5 Purchase 140 units = $15.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
 First in First Out (FIFO)
Example 2:
Mar 14 Sale 190 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14
 First in First Out (FIFO)
Example 2:
Mar 14 Sale 190 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
 First in First Out (FIFO)
Example 2:
Mar 14 Sale 190 units = $19.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
 First in First Out (FIFO)
Example 2:
Mar 27 Purchase 70 units= $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27
 First in First Out (FIFO)
Example 2:
Mar 27 Purchase 70 units= $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120
 First in First Out (FIFO)
Example 2:
Mar 27 Purchase 70 units= $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120 70 16 1,120
 First in First Out (FIFO)
Example 2:
Mar 27 Purchase 70 units= $16.00 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120 70 16 1,120
80 15.92 1274
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 30 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120 70 16 1,120
80 15.92 1274
Mar 29
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 30 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120 70 16 1,120
80 15.92 1274
Mar 29 30 15.92 478
 First in First Out (FIFO)
Example 2:
Mar 29 Sale 30 units = $19.50 per unit
Date Purchase Sales Inventory
Units Units/$ Total $ Units Units/$ Total $ Units Units/$ Total $
Mar 1 60 15 900
Mar 5 140 15.50 2,170 140 15.50 2,170
200 15.35 3,070
Mar 14 190 15.35 2,916
10 15.35 154
Mar 27 70 16 1,120 70 16 1,120
80 15.92 1274
Mar 29 30 15.92 478
50 15.92 796