COURSE
6312 Accounting II
Unit C
ESSENTIAL
STANDARD
OBJECTIVE
6.00
C3
12%
6.02
C3
8%
ESSENTIAL
QUESTIONS
Inventory Control and Cost
Accounting
Apply inventory control methods.
Apply inventory control methods
to calculate the cost of inventory.
 What are the procedures for valuing inventory using each of the
methods of inventory control?
 What are the procedures for determining Cost of Goods Sold using
each of the methods of inventory control?
 What are the procedures for applying the Lower of Cost or Market
method?
TEACHER NOTES
Refer to Objective 6.01 for a detailed summary of the concepts covered in this objective.
UNPACKED CONTENT
I.
First-In First-Out – FIFO
A. Valuing ending inventory
1. List all information on an inventory costing sheet.
2. Assign ending inventory units from the most recent purchase.
3. If all units of ending inventory have not been assigned, use the amounts
from the next most recent purchase.
4. Multiply the units in the Ending Inventory column by the unit prices.
5. Total the amounts to arrive at the cost value of ending inventory.
B. Calculating cost of goods sold
1. List all information on the inventory costing sheet.
2. Assign units sold during the year from the units that were not included in
ending inventory.
3. Multiply the units in the Cost of Goods Sold column by the unit prices.
4. Total the amounts to arrive at the cost of goods sold.
II.
Last-In First-Out – LIFO
A. Valuing ending inventory
1. List all information on an inventory costing sheet.
2. Assign ending inventory units from the earliest purchase.
3. If all units of ending inventory have not been assigned, use the amounts
from the next earliest purchase.
4. Multiply the units in the Ending Inventory column by the unit prices.
5. Total the amounts to arrive at the cost of ending inventory.
B. Calculating cost of goods sold
1. List all information on the inventory costing sheet.
2. Assign units sold during the year from the units that were not included in
ending inventory.
3. Multiply the units in the Cost of Goods Sold column by the unit prices.
4. Total the amounts to arrive at the cost of goods sold.
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Summer 2011 Version 2
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III.
Weighted Average
A. Valuing ending inventory
1. List all information on an inventory costing sheet.
2. Total the number of units and total the cost of all units on hand and
purchased throughout the year.
3. Using the totals found above, Total cost ÷ Total number of units = Price
per unit.
4. Price per unit x number of units in ending inventory = cost value of ending
inventory.
B. Calculating cost of goods sold
1. List all information on the inventory costing sheet.
2. Value of ending inventory − Total cost of beginning inventory + units
purchased throughout the year = Cost of goods sold.
IV. Valuing Inventory at the Lower of Cost or Market
A. Calculate the cost using one of the three inventory methods.
B. Calculate the market price.
C. Determine the smaller number to use as the lower of cost or market amount.
6312 Accounting II
Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
1.
Introduction
Have students review the
concepts learned in Objective
6.01. Explain that this objective
will apply the concepts learned
earlier to actual computations.
2.
Guided Practice
Valuing Ending Inventory Using
FIFO
Distribute the 6.02 Valuing
Ending Inventory Using FIFO
graphic organizer.
RELEVANCY TO OBJECTIVE
RESOURCES
Students will
UNDERSTAND (B2) the
inventory methods available
and reasons each is used.
Objective 6.01
Unpacked Content
With teacher guidance,
students will APPLY (C3) the
procedures to value ending
inventory using the FIFO
method.
6.02 Valuing Ending
Inventory Using
FIFO
6.02 Valuing Ending
Inventory Using
FIFO – KEY
For additional
information see:
Glencoe, p. 149
Southwestern, p. 176
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
3.
Guided Practice
Valuing Ending Inventory Using
FIFO
Have students work the
appropriate guided practice
activities listed in the Resources
column. Step students through
completion of the problems while
demonstrating by using an
overhead projector or a digital
projector.
With teacher guidance,
students will APPLY (C3)
procedures to value ending
inventory using the FIFO
method.
Glencoe
 Problem 5-2, part (b),
p. 152
Southwestern
 Chapter 6, Work
Together 6-2, part (1),
p. 181
Facilitate a class discussion about
the computation process.
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Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
4.
Independent Practice
Valuing Ending Inventory Using
FIFO
RELEVANCY TO OBJECTIVE
Students will independently
APPLY (C3) procedures to
value ending inventory using
the FIFO method.
Have students independently work
the appropriate problems listed in
the Resources column.
RESOURCES
Glencoe
 Problem 5-6, part (1),
p.165
Southwestern
 On Your Own 6-2,
p. 181
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
5.
Guided Practice
Calculating Cost of Goods Sold
Using FIFO
Distribute the 6.02 Calculating
Cost of Goods Sold Using FIFO
graphic organizer.
With teacher guidance,
students will APPLY (C3) the
procedures to properly
calculate cost of goods sold
using the FIFO method.
6.02 Calculating
Cost of Goods Sold
Using FIFO
6.02 Calculating
Cost of Goods Sold
Using FIFO – KEY
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
Numeracy Strategy:
To make a Math-to Life Connection is to see a relationship between a math concept and a real-life
situation. Finding math-to-life connections greatly increases the relevance of new information and skills
being learned.
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INSTRUCTIONAL ACTIVITIES
6.
INSTRUCTIONAL ACTIVITIES
RELEVANCY TO OBJECTIVE
RESOURCES
Guided Practice
Calculating Cost of Goods Sold
Using FIFO
With teacher guidance,
students will APPLY (C3)
procedures to calculate cost of
goods sold using the FIFO
method.
Glencoe
 Problem 5-2, part (b),
p. 152
(determine cost of
goods sold using
graphic organizer)
Have students work the
appropriate guided practice
activities listed in the Resources
column.
Southwestern
 Chapter 6, Work
Together 6-2, part (1),
p. 181
(determine cost of
goods sold using
graphic organizer)
Step students through completion
of the problems while
demonstrating by using an
overhead projector or a digital
projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
7.
Independent Practice
Calculating Cost of Goods Sold
Using FIFO
Students will independently
APPLY (C3) procedures to
calculate cost of goods sold
using the FIFO method.
Have students independently work
the appropriate problems listed in
the Resources column.
Glencoe
 Problem 5-6, part (1),
p. 165
(determine cost of
goods sold using
graphic organizer)
Southwestern
 On Your Own 6-2,
p. 181
(determine cost of
goods sold using
graphic organizer)
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
Numeracy Strategy: Math-to Life Connection
6312 Accounting II
Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
8.
Guided Practice
Valuing Ending Inventory Using
LIFO
Distribute the 6.02 Valuing
Ending Inventory Using LIFO
graphic organizer.
RELEVANCY TO OBJECTIVE
With teacher guidance,
students will APPLY (C3) the
procedures to properly value
ending inventory using the
LIFO method.
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
RESOURCES
6.02 Valuing Ending
Inventory Using
LIFO
6.02 Valuing Ending
Inventory Using
LIFO – KEY
For additional information
see:
Glencoe, pp. 149-150
Southwestern, p 177
Facilitate a class discussion.
Check for understanding and
accuracy.
9.
Guided Practice
Valuing Ending Inventory Using
LIFO
Have students work the
appropriate guided practice
activities listed in the Resources
column.
With teacher guidance,
students will APPLY (C3)
procedures to value ending
inventory using the LIFO
method.
Glencoe
 Problem 5-2, part (c),
p. 152
Southwestern
 Chapter 6, Work
Together 6-2, part
(1), p. 181
Step students through completion
of the problems while
demonstrating by using an
overhead projector or a digital
projector.
.
Facilitate a class discussion.
Check for understanding and
accuracy
6312 Accounting II
Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
10.
Independent Practice
Valuing Ending Inventory Using
LIFO
RELEVANCY TO OBJECTIVE
Students will independently
APPLY (C3) procedures to
value ending inventory using
the FIFO method.
Have students independently work
the appropriate problems listed in
the Resources column.
RESOURCES
Glencoe
 Problem 5-6, part (2),
p. 165
Southwestern
 On Your Own 6-2,
p. 181
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
11.
Guided Practice
Calculating Cost of Goods Sold
Using LIFO
Distribute the 6.02 Calculating
Cost of Goods Sold Using LIFO
graphic organizer.
With teacher guidance,
students will APPLY (C3) the
procedures to properly
calculate cost of goods sold
using the LIFO method.
6.02 Calculating
Cost of Goods Sold
Using LIFO
6.02 Calculating
Cost of Goods Sold
Using LIFO – KEY
Have students complete the
graphic organizer while teacher
steps students through the
process by using an overhead
projector or a digital projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
Numeracy Strategy: Math-to Life Connection
6312 Accounting II
Summer 2011 Version 2
Page 568
INSTRUCTIONAL ACTIVITIES
12.
INSTRUCTIONAL ACTIVITIES
RELEVANCY TO OBJECTIVE
RESOURCES
Guided Practice
Calculating Cost of Goods Sold
Using LIFO
With teacher guidance,
students will APPLY (C3)
procedures to calculate cost of
goods sold using the LIFO
method.
Glencoe
 Problem 5-2, part (c),
p. 152
(determine cost of
goods sold using
graphic organizer)
Have students work the
appropriate guided practice
activities listed in the Resources
column. Step students through
completion of the problems while
demonstrating by using an
overhead projector or a digital
projector.
Southwestern
Chapter 6, Work
Together 6-2, part
(1), p. 181
(determine cost of
goods sold using
graphic organizer)
Facilitate a class discussion.
Check for understanding and
accuracy.
13.
Independent Practice
Calculating Cost of Goods Sold
Using LIFO
Students will independently
APPLY (C3) procedures to
calculate Cost of Goods Sold
using the LIFO method.
Have students independently work
the appropriate problems listed in
the Resources column.
Glencoe
 Problem 5-6, part (2),
p. 165
(determine cost of
goods sold using
graphic organizer)
Southwestern
 On Your Own 6-2,
p. 181
(determine cost of
goods sold using
graphic organizer)
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
Numeracy Strategy: Math-to Life Connection
6312 Accounting II
Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
14.
Guided Practice
Valuing Ending Inventory Using
Weighted Average
Distribute the 6.02 Valuing
Ending Inventory Using
Weighted Average graphic
organizer.
RELEVANCY TO OBJECTIVE
With teacher guidance,
students will APPLY (C3) the
procedures to properly
calculate ending inventory
using the Weighted Average
method.
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
RESOURCES
6.02 Valuing Ending
Inventory Using
Weighted Average
6.02 Valuing Ending
Inventory Using
Weighted Average –
KEY
For additional information
see:
Glencoe, pp. 150-151
Southwestern, p. 177
Facilitate a class discussion.
Check for understanding and
accuracy.
15.
Guided Practice
Valuing Ending Inventory Using
Weighted Average
Have students work the
appropriate guided practice
activities listed in the Resources
column. Step students through
completion of the problems while
demonstrating by using an
overhead projector or a digital
projector.
With teacher guidance,
students will APPLY (C3)
procedures to value ending
inventory using the weighted
average method.
Glencoe
 Problem 5-2, part (d),
p. 152
Southwestern
 Chapter 6, Work
Together 6-2, part
(1), p. 181
Facilitate a class discussion.
Check for understanding and
accuracy.
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INSTRUCTIONAL ACTIVITIES
16.
RESOURCES
INSTRUCTIONAL ACTIVITIES
RELEVANCY TO OBJECTIVE
Independent Practice
Valuing Ending Inventory Using
Weighted Average
Students will independently
APPLY (C3) procedures to
value ending inventory using
the weighted average method.
Glencoe
 Problem 5-7, p. 165
With teacher guidance,
students will APPLY (C3) the
procedures to properly
calculate cost of goods sold
using the weighted average
method.
6.02 Calculating
Cost of Goods Sold
Using Weighted
Average
Have students independently work
the appropriate problems listed in
the Resources column.
Southwestern
 On Your Own 6-2,
p. 181
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
17.
Guided Practice
Calculating Cost of Goods Sold
Using Weighted Average
Distribute the 6.02 Calculating
Cost of Goods Sold Using
Weighted Average graphic
organizer.
6.02 Calculating
Cost of Goods Sold
Using Weighted
Average – KEY
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
Numeracy Strategy: Math-to Life Connection
6312 Accounting II
Summer 2011 Version 2
Page 571
INSTRUCTIONAL ACTIVITIES
18.
INSTRUCTIONAL ACTIVITIES
RELEVANCY TO OBJECTIVE
RESOURCES
Guided Practice
Calculating Cost of Goods Sold
Using Weighted Average
With teacher guidance,
students will APPLY (C3)
procedures to calculate cost of
goods sold using the weighted
average method
Glencoe
 Problem 5-2, part (d),
p. 152
(determine cost of
goods sold using
graphic organizer)
Have students work the
appropriate guided practice
activities listed in the Resources
column. Step students through
completion of the problems while
demonstrating by using an
overhead projector or a digital
projector.
Southwestern
 Chapter 6, Work
Together 6-2, part
(1), p. 181
(determine cost of
goods sold using
graphic organizer)
Facilitate a class discussion.
Check for understanding and
accuracy.
19.
Independent Practice
Calculating Cost of Goods Sold
Using Weighted Average
Students will independently
APPLY (C3) procedures to
calculate cost of goods sold
using the weighted average
Have students independently work method.
the appropriate problems listed in
the Resources column.
When all students have completed
the activity, discuss the solutions.
Have students take notes and
correct any errors they may have
made.
Glencoe
 Problem 5-7, p. 165
(determine cost of
goods sold using
graphic organizer)
Southwestern
 On Your Own 6-2,
p. 181
(determine cost of
goods sold using
graphic organizer)
Numeracy Strategy: Math-to Life Connection
6312 Accounting II
Summer 2011 Version 2
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INSTRUCTIONAL ACTIVITIES
INSTRUCTIONAL ACTIVITIES
20.
Guided Practice
Calculating the Lower of Cost
or Market
Distribute the 6.02 Calculating
the Lower of Cost or Market
graphic organizer.
RELEVANCY TO OBJECTIVE
With teacher guidance,
students will APPLY (C3) the
procedures to properly
calculate the lower of cost or
market.
RESOURCES
6.02 Calculating the
Lower of Cost or Market
6.02 Calculating the
Lower of Cost or Market
– KEY
For additional
information see:
Glencoe, pp. 154-155
Southwestern, p. 180
Step students through completion
of the organizer while
demonstrating by using an
overhead projector or a digital
projector.
Facilitate a class discussion.
Check for understanding and
accuracy.
21.
Review
Have students independently
complete the appropriate review
activities listed in the Resources
column.
Students will independently
APPLY (C3) inventory control
methods to calculate the cost
of inventory.
Southwestern
 Chapter 6,
Application Problem
6-2
(also compute Cost of
Goods Sold)
 Chapter 6, Mastery
Problem 6-5, parts 1,2,
and 3
(also compute Cost of
Goods Sold)
When all students have completed
the activities, discuss the
solutions.
22.
Assessment
Students will independently
complete the chapter test and/or
the Objective 6.02 CTE
Classroom Bank questions.
Glencoe
 Chapter 5 Review,
Part 4, p. 179
 Problem 5-9, p. 167
Students will independently
demonstrate ability to APPLY
(C3) inventory control methods
to calculate the cost of
inventory.
Glencoe
 Chapter 5 Test
Southwestern
 Chapter 6 Test
CTE Classroom Bank
Objective 6.02
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INSTRUCTIONAL
SUPPORT MATERIALS
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Summer 2011 Version 2
Page 574
6.02 Valuing Ending Inventory Using FIFO
Inventory Costing Sheet
FIFO Inventory Costing Method
1
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
2,
3
Totals
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using FIFO is:
Cost of Goods Sold for the Year is:
100 $ 350.00
500 $ 2,000.00
Cost of Good
Units
Tot
700 $
200 $
4
0 $
600 $ 2,350.00
900 $
5
$ 2,350.00
$ 2,800.00
Steps to Value Ending Inventory Using FIFO
1.
2.
3.
4.
5.
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Summer 2011 Version 2
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6.02 Valuing Ending Inventory Using FIFO – KEY
Inventory Costing Sheet
FIFO Inventory Costing Method
1
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
2,
3
Totals
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
100 $ 350.00
500 $ 2,000.00
Cost of Good
Units
Tot
700 $
4 200 $
0 $
600 $ 2,350.00
900 $
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using FIFO is:
Cost of Goods Sold for the Year is:
5
$ 2,350.00
$ 2,800.00
Steps to Value Ending Inventory Using FIFO
1. List all information on Inventory Costing Sheet
2. Assign Ending Inventory units from the most recent purchase
 In this example, ending units are 600. Therefore, 500 units will come
from the October layer; and 100 units will come from the May layer.
3. If all units of Ending Inventory have not been assigned, use the amounts from
the next most recent purchase.
 In this case, 100 units came from the May layer.
4. Multiply the units in the Ending Inventory column by the unit prices.
5. Total the amounts to arrive at the Cost Using FIFO.
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Summer 2011 Version 2
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6.02 Calculating Cost of Goods Sold Using FIFO
Inventory Costing Sheet
1
FIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
100 $ 350.00
500 $ 2,000.00
Totals
600 $ 2,350.00
$ 2,350.00
$ 2,800.00
900 $
2,800.00
3
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using FIFO is:
Cost of Goods Sold for the Year is:
Cost of Goods Sold
Units
Total Cost
700 $
2,100.00
200 $
700.00
0 $
-
4
Steps to Calculate Cost of Goods Sold Using FIFO
1.
2.
3.
4.
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Summer 2011 Version 2
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2
6.02 Calculating Cost of Goods Sold Using FIFO – KEY
Inventory Costing Sheet
1
FIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
100 $ 350.00
500 $ 2,000.00
Totals
600 $ 2,350.00
$ 2,350.00
$ 2,800.00
900 $
2,800.00
3
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using FIFO is:
Cost of Goods Sold for the Year is:
Cost of Goods Sold
Units
Total Cost
700 $
2,100.00
200 $
700.00
0 $
-
4
Steps to Calculate Cost of Goods Sold Using FIFO
1. List all information on Inventory Costing Sheet
2. Assign Units Sold during the year from the units that were not included in
Ending Inventory.
 In this case, 700 units were sold from the January Beginning Layer
 200 units were sold from the May Layer.
3. Multiply the units in the Cost of Goods Sold column by the unit prices.
4. Total the amounts to arrive at the Cost of Goods Sold Using FIFO.
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Summer 2011 Version 2
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2
6.02 Valuing Ending Inventory Using LIFO
Inventory Costing Sheet
1
LIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
600 $ 1,800.00
$
$
-
Totals
Cost of Goods
Units
Total
100
$
2
300 $
1
500 $
3
600 $ 1,800.00
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using LIFO is:
Cost of Goods Sold for the Year is:
$ 1,800.00
$ 1,350.00
4
5
Steps to Value Ending Inventory Using LIFO
1.
2.
3.
4.
5.
.
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Summer 2011 Version 2
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900 $
1
6.02 Valuing Ending Inventory Using LIFO – KEY
Inventory Costing Sheet
1
LIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
600 $ 1,800.00
$
$
-
Totals
Cost of Goods
Units
Total
100
$
2
300 $
1
500 $
3
600 $ 1,800.00
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using LIFO is:
Cost of Goods Sold for the Year is:
$ 1,800.00
$ 1,350.00
4
5
Steps to Value Ending Inventory Using LIFO
1. List all information on Inventory Costing Sheet
2. Assign Ending Inventory units from the earliest purchase
 In this case, the entire ending inventory comes from the January
layer.
3. If all units of Ending Inventory have not been assigned, use the
amounts from the next earliest purchase.
4. Multiply the units in the Ending Inventory column by the unit prices.
5. Total the amounts to arrive at the Cost Using LIFO
.
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Summer 2011 Version 2
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900 $
1
6.02 Computing Cost of Goods Sold Using LIFO
Inventory Costing Sheet
1
LIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
600 $ 1,800.00
$
$
-
Totals
Cost of Goods Sold
Units
Total Cost
100 $
300.00
300 $
1,050.00
500 $
2,000.00
600 $ 1,800.00
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using LIFO is:
Cost of Goods Sold for the Year is:
$ 1,800.00
$ 3,350.00
900 $
3,350.00
3
4
Steps to Calculate Cost of Goods Sold Using LIFO
1.
2.
3. .
4.
.
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Summer 2011 Version 2
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2
6.02 Computing Cost of Goods Sold Using LIFO – KEY
Inventory Costing Sheet
1
LIFO Inventory Costing Method
Purchases for Year
Date
Units
January Beginning Inventory
700
May
300
October
500
Unit Price
$
3.00
$
3.50
$
4.00
Ending Inventory
Units
Total Cost
600 $ 1,800.00
$
$
-
Totals
Cost of Goods Sold
Units
Total Cost
100 $
300.00
300 $
1,050.00
500 $
2,000.00
600 $ 1,800.00
Assume Ending Inventory on December 31, 20xx is 600 units.
Ending Inventory Valued using LIFO is:
Cost of Goods Sold for the Year is:
$ 1,800.00
$ 3,350.00
900 $
3,350.00
3
4
Steps to Calculate Cost of Goods Sold Using LIFO
1. List all information on Inventory Costing Sheet
2. Assign Units Sold during the year from the units that were not included in
Ending Inventory.
 500 units from the October Layer
 300 units were sold from the May Layer.
 100 units were sold from the January layer
3. Multiply the units in the Cost of Goods Sold column by the unit prices.
4. Total the amounts to arrive at the Cost of Goods Sold Using LIFO.
.
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Summer 2011 Version 2
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2
6.02 Valuing Ending Inventory Using Weighted Average
Inventory Costing Sheet
1
Weighted Average Inventory Costing Method
Purchases for Year
Date
January Beginning Inventory
May
October
Totals
Unit
Units
Price Total Cost
700 $ 3.00 $ 2,100.00
300 $ 3.50 $ 1,050.00
500 $ 4.00 $ 2,000.00
1500
$ 5,150.00
2
Assume Ending Inventory on December 31, 20xx is 600 units.
Total Cost of Purchase and Beg Inventory:
DIVIDED BY Total Units:
Weighted Average Price Per Unit
MULTIPLIED BY Units in Ending Inventory
Cost of Ending Inventory
Cost of Good Sold
4
$ 5,150.00
÷ $ 1,500.00
$
3.43
x
600
$ 2,060.00
3
5
$ 3,090.00
Steps to Value Ending Inventory Using Weighted Average
1.
2.
3.
4.
5.
6.
6312 Accounting II
Summer 2011 Version 2
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6.02 Valuing Ending Inventory Using Weighted Average – KEY
1
Inventory Costing Sheet
Weighted Average Inventory Costing Method
Purchases for Year
Date
January Beginning Inventory
May
October
Totals
Unit
Units
Price Total Cost
700 $ 3.00 $ 2,100.00
300 $ 3.50 $ 1,050.00
500 $ 4.00 $ 2,000.00
1500
$ 5,150.00
2
Assume Ending Inventory on December 31, 20xx is 600 units.
Total Cost of Purchase and Beg Inventory:
DIVIDED BY Total Units:
Weighted Average Price Per Unit
MULTIPLIED BY Units in Ending Inventory
Cost of Ending Inventory
4
Cost of Good Sold
$ 5,150.00
3
÷ $ 1,500.00
$
3.43
x
600
5
$ 2,060.00
$ 3,090.00
Steps to Value Ending Inventory Using Weighted Average
1. List all information on Inventory Costing Sheet
2. Total the number of units and the cost of all units on hand and purchased
throughout the year.
3. Divide total cost computed by the total number of units on hand and
purchased throughout the year.
4. This total is your Weighted Average Price per Unit.
5. Multiply Weighted Average Price per Unit by the number of units remaining
in ending inventory.
6. This amount is the Cost Using Weighted Average
6312 Accounting II
Summer 2011 Version 2
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6.02 Calculating Cost of Goods Sold Using Weighted Average
Inventory Costing Sheet
1
Weighted Average Inventory Costing Method
Purchases for Year
Date
January Beginning Inventory
May
October
Totals
Unit
Units
Price Total Cost
700 $ 3.00 $ 2,100.00
300 $ 3.50 $ 1,050.00
500 $ 4.00 $ 2,000.00
1500
$ 5,150.00
2
Assume Ending Inventory on December 31, 20xx is 600 units.
Total Cost of Purchase and Beg Inventory:
DIVIDED BY Total Units:
Weighted Average Price Per Unit
MULTIPLIED BY Units in Ending Inventory
Cost of Ending Inventory
Cost of Good Sold
$ 5,150.00
÷ $ 1,500.00
$
3.43
x
600
$ 2,060.00
$ 3,090.00
2
3
Steps to Calculate Cost of Goods Sold Using Weighted Average
1.
2.
3.
6312 Accounting II
Summer 2011 Version 2
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6.02 Calculating Cost of Goods Sold Using Weighted Average
– KEY
1
Inventory Costing Sheet
Weighted Average Inventory Costing Method
Purchases for Year
Date
January Beginning Inventory
May
October
Totals
Units
700
300
500
Unit
Price Total Cost
$ 3.00 $ 2,100.00
$ 3.50 $ 1,050.00
$ 4.00 $ 2,000.00
1500
$ 5,150.00
2
Assume Ending Inventory on December 31, 20xx is 600 units.
Total Cost of Purchase and Beg Inventory:
DIVIDED BY Total Units:
Weighted Average Price Per Unit
MULTIPLIED BY Units in Ending Inventory
Cost of Ending Inventory
Cost of Good Sold
$ 5,150.00
÷ $ 1,500.00
$
3.43
x
600
$ 2,060.00
$ 3,090.00
2
3
Steps to Calculate Cost of Goods Sold Under Weighted Average
1. List all information on Inventory Costing Sheet
2. Subtract the calculated Cost of Ending Inventory based on the Weighted
Average method from the Total Cost of Purchases for Year.
3. This total is your Cost of Goods Sold using Weighted Average.
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Summer 2011 Version 2
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6.02 Calculating the Lower of Cost or Market
Lower of Cost or Market Costing Method
1
Method use to Value Ending Inventory: ______________________________________________
2
Ending value of inventory calculated:
Ending value of inventory at Market Price:
$ 65,124.00
$ 68,229.00 P
$ 65,557.00 P
$ 63,113.00
Inventory is valued at the LOWEST of Cost or Market Price.
3
Steps to Calculate Lower of Cost or Market
1.
2.
3. .
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Summer 2011 Version 2
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6.02 Calculating the Lower of Cost or Market – KEY
Lower of Cost or Market Costing Method
1
Method use to Value Ending Inventory: ______________________________________________
2
Ending value of inventory calculated:
Ending value of inventory at Market Price:
$ 65,124.00
$ 68,229.00 P
$ 65,557.00 P
$ 63,113.00
Inventory is valued at the LOWEST of Cost or Market Price.
3
Steps to Calculate Lower of Cost or Market
1. Calculate the cost using one of the three Inventory methods.
2. Calculate the market price.
3. Choose the lower of the numbers resulting from the calculations in #1
and #2 to use as the lower of cost or market amount. (In the example
above, the lower result is $65,557.00.)
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Summer 2011 Version 2
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6.02 Prototype Assessment Items – Page 1
These prototype assessment items illustrate the types of items used in the item bank for
this objective. All items have been written to match the cognitive process of the apply
verb in the objective. These exact questions will not be used on the secure
postassessment, but questions in similar formats will be used.
Scenario 1
Purchases for Year
Date
Units
January Beginning Inventory
May
October
1500
800
500
Unit Price
$
$
$
5.00
5.50
6.00
Totals
Assume Ending Inventory on December 31, 20xx is 600 units.
1.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as indicated above. At the end of the year, 600 units remained in ending
inventory. Determine the cost of the ending inventory under the FIFO method.
A.
B.
C.
D.
$3,550.00
$3,000.00
$3,300.00
$3,192.00
Answer:
2.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as indicated above. At the end of the year, 600 units remained in ending
inventory. Determine the cost of the ending inventory under the LIFO method.
A.
B.
C.
D.
$3,550.00
$3,000.00
$3,300.00
$3,192.00
Answer:
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Summer 2011 Version 2
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6.02 Prototype Assessment Items – Page 2
3.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as shown. At the end of the year, 600 units remained in ending
inventory. Determine the cost of the ending inventory under the Weighted Average
method.
A.
B.
C.
D.
$3,550.00
$3,000.00
$3,300.00
$3,192.00
Answer:
4.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as shown. At the end of the year, 600 units remained in ending
inventory. Determine the cost of goods sold under the FIFO method.
A.
B.
C.
D.
$11,900.00
$11,704.00
$11,500.00
$11,350.00
Answer:
5.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as shown. At the end of the year, 600 units remained in ending
inventory. Determine the cost of goods sold under the LIFO method.
A.
B.
C.
D.
$11,900.00
$11,704.00
$11,500.00
$11,350.00
Answer:
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Summer 2011 Version 2
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6.02 Prototype Assessment Items – Page 3
6.
In Scenario 1, Joe’s Junk has beginning inventory and purchases for widgets, stock
number 25, as shown. At the end of the year, 600 units remained in ending
inventory. Determine the cost of goods sold under the Weighted Average method
(round weighted average price per unit to two decimal places).
A.
B.
C.
D.
$11,900.00
$11,704.00
$11,500.00
$11,350.00
Answer:
6312 Accounting II
Summer 2011 Version 2
Page 591