FIFO Method?

Question

Ok so I am in my first year of accounting and I have a question...we are doing a FIFO, LIFO, and a Weighted Average sample problem and I have the formula but on the FIFO inventory sheet can there be a negative inventory? I put in the beginning inventory....here it is...maybe someone could help me with what I am doing wrong...

Jan. 1 Beg. Inventory 120 units @ $6.00 = $720

Jan. 10 Sales 70 units @ $15

Mar. 7 Purchase 200 units @ $5.50 = $1,100

Mar. 15 Sales 125 units @ $15

July 28 Purchase 500 units @ $5.00 = $2,500

Oct. 3 Purchase 375 units @ $4.40 = $1,650

Oct. 5 Sales 600 units @ $15

Dec. 19 Purchase 100 units @ $4.10 = $410

Totals: 1,295 units Acquired at Cost
$6,380 under units Acquired at Cost
795 Units Sold at Retail....
I have started this and have it mostly filled out....I can email if you want...

Answer 1

Jan 1 Op Inventory 120 units @ $6.00 = $720
Jan 10 Sales 70 units @ $6.00 = $420
Mar 7 Purchase 200 units @ $5.50 = $1,100
Mar 15 Sale 50 units @ $6.00 = $300 (Refer Note 2)
75 units @ 5.50 = $413
Jul 28 Purchase 500 units @ 5.00 = 2,500
Oct 3 Purchase 375 units @4.40 = 1,650
Oct 5 Sales 125 units @5.50 = 687 (Refer Note 3)
375 units @ 4.40 = 1650
Dec 19 Purchase 100 units @ 4.10 = 410



Note:

1. I think the mistake that you are doing is that, you are taking the sale value while deducting the units sold. This will give you a negatve inventory. You have to take the cost of the units on FIFO basis. For Eg: Sales on Jan 10 is @ $15 per unit, however while computing inventory you should take its corresponding cost, which is $ 6.00. Look at the solution above

2. Out of 120 units in the opening inventory, 70 units were sold on Jan 10th, hence the remaining inventory is 50 units. On the sale made on Mar 15, it is assumed that these 50 units are first sold and then the inventory out of Mar 7th purchase is sold. This is the concept of FIFO.

3. This based on the same principle as in Note 2


E Mail me if you need more help!

Cheers!!!

Answer 2

The ending inventory under FIFO and using the perpetual inventory method is $2,185. If you want the worksheet, email me your email address cos it's in an Excel file.