Periodic Inventory System

Sales (R ) Sales Returns and Allowance (XR) Sales Discounts (XR) Inventory (A) Cost of Goods Sold (E) Purchases (E) Purchase Returns and Allow. (XE) Purchase Discounts (XE) Transportation in (E) Purchases Accounts Payable Accounts Payable Purchase Returns and Allowances Accounts Payable (balance) Purchase Discounts (discount) Cash (net) Transportation in Cash Accounts Receivable (retail price) Sales (retail price) No entry Sales Ret.&Allow. (retail price) Accounts Receivable (retail price) No entry Cash Sales Discounts Accounts Receivable Cost of Goods Sold Inventory (beginning) Cost of Goods Sold Purchase Returns and Allowances Purchase Discounts Purchases Cost of Goods Sold Transportation in Inventory (ending) Cost of Goods Sold Cost of Goods Sold (Periodic) Beginning Inv.(EOP entry) Purch. R&A (EOP entry) Purchases (EOP entry) Purch. Disc. (EOP entry) Transp. In (EOP entry) Ending Inv. (EOP entry) COGS Receipt with Discount Sales Return Revenue Accounts

Perpetual Inventory System

Sales (R ) Sales Returns and Allowances (XR) Sales Discounts Inventory (A) Cost of Goods Sold (E)

Asset Accounts Cost of Goods Sold Accounts

Purchase on Account Purchase Return Payment taking discount

Pay Transportation In Sale on Account

Inventory Accounts Payable Accounts Payable Inventory Accounts Payable (balance) Inventory (discount) Cash (net) Inventory Cash Accounts Receivable (retail price) Sales (retail price) Cost of Goods Sold (cost) Inventory (cost Sales Ret.&Allow. (retail price) Accounts Receivable (retail price) Inventory (cost) Cost of Goods Sold (cost) Cash Sales Discounts Accounts Receivable No entries required unless physical count differs from ending balance in inventory account. Physical < than Inventory bal. Cost of Goods Sold Inventory Physical count > than Inventory bal. Inventory Cost of Goods Sold Cost of Goods Sold (Perpetual) Cost of Goods Sold

End of Period Entries

Inventory (Periodic) Beginning Inv. Beginning Inv. (EOP entry) Ending Inv. (EOP entry) Ending Inventory

Inventory (Perpetual) Beginning Inv. Purchases Purch. R&A Transp. In Purch. Disc. Cost of Goods Sold Ending Inventory

At 1/1, Beagle Company had a beginning inventory of 5 units at a unit cost of $2 each. On 1/5, Beagle purchased 10 units at $3 each. On 1/8, Beagle sold 12 units at a sales price of $10 each. On 1/15, Beagle made its second purchase of 15 units at $4 each. On 1/25, Beagle sold 8 units at a sales price of $10 each. On 1/31, Beagle made a physical count of inventory. Ending inventory consisted of 10 units.

Periodic System
1. Account for BI & all purch. first (COGAS) 2. Calculate $EI from physical count and deduct from COGAS to determine COGS

Perpetual System
1. Account for purchases and sales as they happen. 2. Deduct COGS from COGAS to determine $EI 3. Compare physical count with unit count in inventory records

Periodic (FIFO-LISH) Unit Units Cost 1/1 Beg. Inv. 5 $2 1/5 1st purch 10 $3 1/15 2nd purch 15 $4 30 COGAS UAS EI (10) $4 20 COGS Units Sold

Total Cost $10 $30 $60 $100 ($40) $60

1/1 Beg. Inv. 1/5 1st purch 1/8 Sale (12) Balance 1/15 2nd purch 1/25 Sale (8) Bal./EI Total

Physical count of ending inventory: 10 units

Perpetual (FIFO-LISH) Unit Units Cost COGAS COGS 5 $2 $10 10 $3 $30 (5) $2 ($10) (7) $3 ($21) 3 $3 15 $4 $60 (3) $3 ($9) (5) $4 ($20) 10 $4 $100 ($60)

Total $10 $40 $30 $9 $9 $69 $60 $40 $40

Periodic (LIFO-FISH) Unit Units Cost 1/1 Beg. Inv. 5 $2 1/5 1st purch 10 $3 1/15 2nd purch 15 $4 30 COGAS UAS EI (5) $2 (5) $3 20 COGS Sold

Total Cost $10 $30 $60 $100 ($10) ($15) $75

1/1 1/5 1/8

1/15 1/25

Physical count of ending inventory: 10 units

Perpetual (LIFO-FISH) Unit Units Cost COGAS COGS Beg. Inv. 5 $2 $10 1st purch 10 $3 $30 Sale (12) (10) $3 ($30) (2) $2 ($4) Balance 3 $2 2nd purch 15 $4 $60 Sale (8) (8) $4 ($32) Balance 3 $2 7 $4 Ending Inv. 10 Total $100 ($66) Perpetual (Moving Average) Unit Units Cost COGAS COGS 5 $2.00 $10 10 $3.00 $30 15 $2.67 (12) $2.67 ($32.00) 3 $2.67 15 $4.00 $60 18 $3.78 (8) $3.78 ($30.22) 10 $3.78 $100 ($62.22)

Total $10 $40 $10 $6 $6 $66 $34 $6 $28 $34

Periodic (Weighted Average) Unit Total Cost Units Cost 1/1 Beg. Inv. 5 $2 $10 1/5 1st purch 10 $3 $30 1/15 2nd purch 15 $4 $60 30 COGAS UAS $100 EI (10) $3.33 ($33.33) 20 COGS $66.67 Sold Physical count of ending inventory: 10 units Wgt. Avg. Unit Cost = COGAS UAS $100 30 $3.33

1/1 Beg. Inv. 1/5 1st purch Wgt. Avg 1/8 Sale Balance 1/15 2nd purch Wgt. Avg. 1/25 Sale Bal./EI Total

Total $10.00 $40.00 $40.00 $8.00 $8.00 $68.00 $68.00 $37.78 $37.78

Wgt. Avg. Unit Cost =

Cost Flow Assumptions

Financial Statement Comparisons
Beagle Company Kieso 12e Problem 8-6

Periodic Inventory System

Sales (20 @ $10) COGS Gross Profit Operating Expenses (assumed) Income before tax Income Taxes (30% assumed) Net Income Ending Inventory FIFO-LISH LIF0-FISH $200.00 $200.00 (60.00) (75.00) $140.00 $125.00 (70.00) (70.00) $70.00 $55.00 (21.00) (16.50) $49.00 $38.50 $40.00 $25.00 Wgt. Avg. $200.00 (66.67) $133.33 (70.00) $63.33 (19.00) $44.33 $33.33 Sales (2,500 @ $30; 2,000 @ $33) COGS Gross Profit Operating Expenses (assumed) Income before tax Income Taxes (30% rate assumed) Net Income Ending Inventory

Periodic Inventory System

FIFO-LISH LIF0-FISH $141,000 $141,000 ($82,500) ($96,000) $58,500 $45,000 150,000 150,000 $208,500 $195,000 (62,550) (58,500) $145,950 $136,500 $34,500 $21,000 Wgt. Avg. $141,000 ($87,750) $53,250 150,000 $203,250 (60,975) $142,275 $29,250

Perpetual Inventory System

Sales COGS Gross Profit Operating Expenses Income before tax Income Taxes (30% assumed) Net Income Ending Inventory FIFO-LISH LIFO-FISH Moving Avg. $200.00 $200.00 $200.00 ($60.00) ($66.00) ($62.22) $140.00 $134.00 $137.78 (70.00) (70.00) (70.00) $70.00 $64.00 $67.78 (21.00) (19.20) (20.33) $49.00 $44.80 $47.45 $40.00 $34.00 $37.78 Sales COGS Gross Profit Operating Expenses Income before tax Income Taxes (30% rate assumed) Net Income Ending Inventory

Perpetual Inventory System

FIFO-LISH LIFO-FISH Moving Avg. $141,000 $141,000 $141,000 ($82,500) ($88,000) ($84,000) $58,500 $53,000 $57,000 150,000 150,000 150,000 $208,500 $203,000 $207,000 (62,550) (60,900) (62,100) $145,950 $142,100 $144,900 $34,500 $29,000 $33,000