Question

Camera Beginning inventor Unt Cost 590 Sale Purchase Sale 100 Prepare inventory using Fire and Average methods with journal

Answer 1

Answer:

FIFO Method:

This method describes first in first out of the inventory which means that inventory purchased first will be sold out first. The above question is divided into purchase, issue (sale) and the remaining balance so the balance of the inventory will be clearly arrived :

Date

Purchase of camera

Issues of camera

Remaining Balance

	Units	$/units	Total $	Units	$/units	Total $	Units	$/units	Total $
Jan 1	20	90	1800				20	90	1800
Jan 5	60	75	4500				60	75	4500
Jan 15				20	90	1800
				10	75	750	50	75	3750
Jan 26	80	85	6800				80	85	6800
Jan 30				40	75	3000	10	75	750
							80	85	6800

AVERAGE COST METHOD:

In this method the inventories are valued at weighted average cost of all the purchases. Average cost is calculated each time when the inventory is issued.

Date

Purchase of camera

Issue of cameras

Remaining Balance

	Unit	$/units	Total $	Unit	$/units	Total $	Unit	$/units	Total $
Jan 1	20	90	1800				20	90	1800
Jan 5	60	75	4500				60	75	4500
							80	78.75	6300
Jan 15				30	78.75	2362.50	50	78.75	3937.50
Jan 26	80	85	6800				80	85	6800
							130	82.596	10737.50
Jan 30				40	82.596	3303.84	90	82.596	7433.66

Now, the journal Entries in both methods:

Date

FIFO Method

Average Cost Method

	Particulars	DR (in $)	CR (in $)	Particulars	DR (in $)	CR (in $)
Jan 5	Purchase A/c Dr	4500		Purchase A/c Dr	4500
	To Accounts Payable		4500	To Accounts Payable		4500
Jan 15	Accounts Receivable A/c Dr	2550		Accounts Receivable A/c Dr	2362.50
	To Sales		2550	To Sales		2362.50
Jan 26	Purchase A/c Dr	6800		Purchase A/c Dr	6800
	To Accounts Payable		6800	To Accounts Payable		6800
Jan 30	Accounts Receivable A/c Dr	7550		Accounts Receivable A/c Dr	7433.66
	To Sales		7550	To Sales		7433.66