250
Chapter 8 Appendix
Inventory Valuation
Date
Purchases
Sales
Balance
Quantity Unit Cost Value Quantity Unit Cost Value Quantity Unit Cost Value
March 1
10
$10 $100
March 5
50
$12
$600
10
$10 $100
50
$12 $600
March 15
40
$14
$560
10
$10 $100
50
$12 $600
40
$14 $560
March 19
20
$16
$320
10
$10 $100
50
$12 $600
40
$14 $560
20
$16 $320
Sales for the Month
10
$10
$100
40
$12
$480
10
$12 $120
15
$14
$210
25
$14 $350
20
$16 $320
Ending Inventory
$790
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FIGURE 8A.2
1
The purchase of 50 pens on March 5 is added to the value of inventory.
2
The purchase of 40 pens on March 15 is added to the value of inventory.
3
The purchase of 20 pens on March 19 is added to the value of inventory.
4
The sales are tallied at the end of the month and are identified based on which batch of inventory
they came from. In this example, the entire amount of opening inventory was sold, 40 items
from the March 5 purchase were sold and 15 items from the March 15 purchase were sold.
Total cost of goods sold is $790 ($100 + $480 + $210).
5
The value of ending inventory is made up of 10 pens remaining from the March 5 purchase, the
25 pens remaining from the March 15 purchase and the 20 pens remaining from the March 19
purchase. Total value of inventory is $790 ($120 + $350 + $320).
Using First-In, First-Out
When using the FIFO method, list the purchases in the order they were received.This will clearly
show which items were the first ones purchased and assumed the first ones to be sold.Then list the
sales for the period underneath since inventory costs are not recorded until the end of the period.
This is done by using a table as shown in Figure 8A.3. The opening balance and the transactions
from Figure 8A.1 are listed in the table.This is similar to the specific identification method. At the
bottom of the figure is the value of ending inventory.
1
2
3
4
5
