Chapter 9 Inventory (stock) valuation - PowerPoint PPT Presentation

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Chapter 9 Inventory (stock) valuation

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Chapter 9 Inventory (stock) valuation Inventory (stock) valuation A good estimate of closing stock is provided by three methods of stock valuation: First-In-First-Out ... – PowerPoint PPT presentation

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Title: Chapter 9 Inventory (stock) valuation


1
Chapter 9Inventory (stock) valuation
2
Inventory (stock) valuation
  • A good estimate of closing stock is provided by
    three methods of stock valuation
  • First-In-First-Out (FIFO) Method
  • Last-In-First-Out (LIFO) Method
  • Average Cost (AVCO) Method

3
First-In-First-Out (FIFO) Method
  • In this method we assume that the first set of
    inventory received is the first to leave the
    warehouse. The resulting ending inventory will be
    valued at current prices.

4
First-In-First-Out (FIFO) Method
  • Stock valuation schedule (FIFO)
  • January 1, 2006 - June 30, 2006

5
Last-In-First-Out (LIFO) Method
  • In this method we assume that the last set of
    inventory received is the first to leave the
    warehouse. The resulting ending inventory will be
    valued at older prices.

6
Last-In-First-Out (LIFO) Method
  • Stock valuation schedule (LIFO)
  • January 1, 2006 - June 30, 2006

7
Average Cost (AVCO) Method
  • In this method, each time goods are purchased we
    calculate a new average cost of inventory. The
    average cost is calculated using the equation
  • Average cost of inventory
  • Total value of goods on hand Quantity of
    goods on hand
  • The resulting ending inventory will be valued at
    the last calculated average.

8
Average cost (AVCO) Method
  • Stock valuation schedule (AVCO)
  • January 1, 2006 - June 30, 2006

2006 Receipts Issues Average Balance
Jan 200_at_10 0 10.00 200_at_102000
Feb 300_at_14 0 12.40 500x12.406200
Apr 0 250_at_12.40 12.40 250_at_12.403100
June 450_at_15 0 14.07 700_at_14.079850
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