PERPETUAL INVENTORY
Periodic versus Perpetual
Periodic Inventory means that the _______________
of the inventory is determined at the end of the period
Perpetual Inventory means that the value of the
inventory is determined at the end of each transaction
Perpetual FIFO Example
Inventory records indicated the following just prior to the
sale of 30 units on June 20
Date
Beg Inv.
June 5
June 15
TOTAL
#
Unit Cost
Total Cost
10
24
20
54
2.20
2.25
2.30
22
54
46
122
# units sold
Assuming the First-In, First-Out Perpetual Method, the first
10 units sold would be from Beginning Inventory
30 units sold minus 10 units from Beginning Inventory
leaves 20 units to be sold from the next cost ________
Perpetual FIFO Example
Multiply the Unit Cost by the # of Units sold
Date
#
Unit
Cost
Total
Cost
# units
sold
Beg Inv.
June 5
June 15
TOTAL
10
24
20
54
2.20
2.25
2.30
22
54
46
122
10
20
Cost of Goods
Sold
30
Beginning Inventory 2.20 * 10 = 22
June 5 2.25 * 20 = 45
Total 22 + 45 = 67
1
Journal Entries
Journal entry to record the Cost of Sales for the 30 units is as follows:
Date
June 20
Account title
Debit
Credit
Cost of Goods Sold
Inventory
Journal entry to record the Sales of the 30 units at $5 each is as follows:
Date
June 20
Account title
Debit
Credit
Accounts Receivable
Sales
Both journal entries are needed to record sales and cost of goods sold
Perpetual FIFO Example
Inventory record would change to reflect the ____________
Date
#
Unit
Cost
Beg Inv.
0
10
June 5
4
24
June 15
20
2.20
2.25
2.30
Total
Cost
TOTAL
All 10 units in Beginning Inventory would be sold
24 units in June 5 minus the 20 units sold leaves only
4 units in the June 5th inventory layer
Perpetual FIFO Example
Then 30 more units were purchased on June 25th for $2.32 per unit
which must be added to the inventory records as shown below:
Date
June 5
June 15
June 25
#
Unit Cost
4
20
30
2.25
2.30
Total Cost
9.00
46.00
TOTAL
2
Perpetual FIFO Example
Then 40 units were sold on June 30
Date
June 5
June 15
June 25
TOTAL
#
Unit Cost
4
20
30
54
2.25
2.30
2.32
Total Cost
Units Sold
9.00
46.00
69.60
124.60
The first 4 units would be sold out of the June 5th units
The next 20 units would be sold out of the June 15th units
The remaining 16 units would be sold out of the June 25th units
Perpetual FIFO Example
Cost of Goods Sold for the 40 units are as follows:
Date
June 5
June 15
June 25
TOTAL
#
Unit
Cost
Total Cost
# units
sold
4
20
30
40
2.25
2.30
2.32
9.00
46.00
69.60
124.60
4
20
16
40
Cost of units
sold
Multiply the Unit Cost by the # of Units Sold
June 5 Unit Cost of 2.25 times 4 = 9.00
June 15 Unit Cost of 2.30 times 20 = 46.00
June 25 Unit Cost of 2.32 times 16 = 37.12
Total Cost of Units Sold equals $92.12
Journal Entries
Journal entry to record the cost of the sale of 40 units is as follows:
Date
June 30
Account title
Debit
Credit
Cost of Goods Sold
Inventory
Journal entry to record the sale of 40 units at $5 each is as follows:
Date
June 30
Account title
Debit
Credit
Accounts Receivable
Sales
Both journal entries are needed to record sales and cost of goods sold
3
INVENTORY
The beginning inventory cost of $124.60 minus $92.12 equals $32.48
Inventory record would change to show that only 14 units remain
in the June 25 row
Date
June 25
#
Unit Cost
14
2.32
Total Cost
Inventory records indicated the following just prior to the
sale of 8 units on Aug 18
Date
#
Unit Cost
Total Cost
Beg Inv.
August 5
August 15
TOTAL
5
10
8
23
1.20
1.30
1.50
6
13
12
31
# units sold
8 units were sold for $3 each on Aug 18
Date
# units
sold
Unit
Cost
5
3
1.20
1.30
Beg Inv.
August 5
TOTAL
Total
Cost
The Journal entry to record the $9.90 cost of goods
sold is as follows:
Date
Aug 18
Account title
Debit
Credit
Cost of Goods Sold
Inventory
The Journal entry to record the sale of 8 units at $2
each is as follows:
Date
Aug 18
Account title
Debit
Credit
Accounts Receivable
Sales
Both journal entries are needed to record sales and cost of goods
sold
4