[Music] foreign [Music] hello everybody welcome to search was accounting lessons ph and this is discussion 5 inventories part 2 inventory cost flow techniques at the end of the video you should be able to compute for the amount of ending inventory cost of goods sold in gross profit under specific identification method first in first out method weighted average method and moving average method before anything else please like share and subscribe to search was accounting lessons ph and hit the notification bell button to alert you of the latest video lessons for all of your questions comments and suggestions please put them down in the comment section below and for webinar and speakership invites please send me a message at kevintroy.chua1994 gmail.com thank you for your utmost support the search was accounting lessons ph and may these videos continue to help students in their online learning and academic development and made these videos continue to help teachers in enhancing their lesson plans and teaching methodologies okay let's start so in the last lesson we discussed the general concepts of inventories what should be included what should be excluded and then i've also introduced you to some terminologies that we need to understand in inventories what we will be discussing inventory cost flows nothing in this video okay so we have inventory cost flow techniques again the specific identification method mentioned under paragraph 23 of ias2 first infrasouth method mentioned under paragraph 25 also together with weighted average method and then in paragraph 27 the manpo is the moving average method and i have mentioned din pos in the previous video the hindi napo permitted under ias 2 ampagami punate but as far as is concerned hindi napo permitted lifo cost method okay let's start with specific identification method according to ias 2 paragraph 23 the cost of inventories of items that are not ordinarily interchangeable um so if your goods are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned using the specific identification of their [Music] [Music] you really use the specific identification method for that okay so to discuss let's have problem number one problem okay so charleston company provided you the following information on selling price depot merchandise is 75 so it is specific identification but just to simplify foreign beginning inventory labeled batch a in the 2 000 units cost is 50 and then on purchase exponent is batch b 5000 units at 45 batch c 6 000 units at 55 and then batch d 2 000 units at 40. now my on sales on october 6 9 16 17 27 and 31. we are required to compute for the amount of cost of goods sold gross profit and ending inventory the help of specific identification okay so let's start solving this problem the first thing you need to do is to do this um table okay and the cost uh on those related batches okay so no october auto birthday no october 6 1000 units from batch b on october 9 500 units from batch a on october 16 4 000 units from batch c and then october 17 500 units is a batch b october 27 500 units sabatch d and then one thousand units from batch c so october 31 as you can see in the relate nut and consumption specific identification we specifically identify and so you get the total number of units a warehouse per batch specifically identified then you multiply it pause a cost kada batch and that is the total cost of goods sold per kinuhaman warehouse warehouse a or batch a b c or d then get the total cost on products that is your cost of goods sold 387 thousand five hundred step two is the competition of your gross profit so seven thousand five hundred units then you multiply it by the selling price of 75 pesos that's uh 562 thousand five hundred minus punatens a cost of goods sold and then compute nathan kanina which is 387 thousand five hundred your tubo or your gross profit is one hundred seventy five thousand for your ending inventory gantorimpuyon table batch a b c or d then remember meranpotayum beginning balance the 6 000 units for batch c and two thousand units from batch d it did the dog in the hat matches that is your ending inventory or total remaining unit so that is your ending inventory in units multiplied input in a cost associated with those batches that is your total cost of ending inventory per batch as your total amount of ending inventory is 347 thousand 500. to check the total combined ending inventory and cost of goods sold should equal cost of goods available for sale we started the period with an inventor with a beginning inventory of 2 000 times 15 100 000 then lat put on purchases nathan in multiply nathan which will give you total purchases during the period of 635 thousand that is your cost of goods available for sale under specific identification method for problems two three and four we will be using the same problem parameters differences now five four weighted average and moving average let's proceed with first in first out method according to ias 2 paragraph 25 the cause of inventories other than those a paragraph 23 in a specific identification method it's either the entity has a choice on the use of either first in first out or weighted average okay an entity shall use the same cost formula for all inventories having similar nature so pretty poor nothing on fifo or weighted average [Music] similar nature okay okay for inventories with a different nature or use different cost formulas may be justified my own talking about fifo the fifo formula assumes that the the items of inventory that were purchased or produced first are sold first produce in the case of manufacturing you know and consequently the items remaining in inventory unattitude or recently purchased items okay and five foreign company provided you the following information october 1 beginning inventory punatin is 2 000 times 50 tap was not purchased put on three thousand at fifty five nag bentana one nagbentana 1500 cost of goods october 9 23 30. now look at the uh statement below on sabe assume that the company sells only one kind of product making it possible to use the fifo method okay so same requirement what is the cost of goods sold gross profit in ending inventory okay let's start so putting a stock card okay nothing inventory stock card receipt you received one beginning balance punatin is two thousand times fifty one hundred thousand plucked into october three that purchased the putin and three thousand units at fifty five cadeza the total cost is one 165 000. inventory not available in 3 55 pesos 2000 minus 1 500 units 500 units and 3 000 units more at 55. indeed so this is your new balance okay then same procedure october 20 ah sorry october 13th now october 13th and 2000 units 60 pesos okay sales transaction transactions two thousand minus one hundred ambulance one thousand eight hundred makhan is 1860 pesos acharya recently purchased mother 1000 at 65. 1500 units since sufficient point 1 800 parameters 1500 okay so one thousand nine hundred minus one thousand five hundred four hundred in one thousand a bini mono october 29 1000 times 65 okay so you just get the total of uh 75 000 in this one this one this one in this one that is your cost of goods sold sixty one thousand how about your ending inventory etopoion balance inventory at the end of the period twenty four thousand plus sixty five thousand yen that is your ending inventory eighty nine 000 how to compute for your gross profit the gross profit is you multiply the amount of sales which is units and six thousand six hundred one five plus three six plus another one five multiplying opposite selling price to eighty pesos the sales is five hundred twenty eight thousand less cost of goods on the three sixty one thousand and at in pong gross profit 167 000 okay sorry physical account at the end of the period so huang ending inventory is one thousand four hundred units your first step is to get the most recent cost and what is the most recent cost you know sixty-five okay so 65 times 1000 units 65 000. 400 units 24 000 you will get the same amount of ending inventory 89 000. where the periodic system or perpetual system on first in first out results okay i hope you understand our first in first out method let's proceed now to the weighted average method okay under the weighted average method partner ponify for link similar in nature the cost of each item is determined from the weighted average of the cost of similar items remember the word has similar items [Music] okay at the beginning of the period and the cost of similar items purchased or produced during the period so he averaged available products at the beginning of the period atlanta chestnut and during the period okay so we use the same problem and let's assume that the company only has one kind of product is weighted average method okay so same procedure problem this is your first step compute for the cost of goods available for sale in your average cost per unit and how do we compute for the cost of goods available for sale you get your beginning inventory of two thousand units at fifty tapos latin purchases okay purchase money october 3 no october 13 october 29 3 000 units 2 000 units 1 000 units then you multiply them to their respective cost for a total purchases of three hundred fifty thousand okay so your cost of goods available for sale is beginning inventory plus your purchases for hundred fifty thousand inventory available for sale two thousands a beginning plus three thousand plus two thousand at one thousand a billion eight thousand units if your total cost of goods available for sale is four hundred fifty thousand divided by eight thousand units and cost per unit more fifty six point twenty five ethernet basis okay that will be now your cost multiplier 56 pesos and 25 centavos okay now compute for the total amount of ending inventory since then the number of units is 1400 you simply multiply it multiplier the 56.25 which is the average cost automatically your ending inventory is just 56.25 times 1478 thousand seven hundred fifty and then for cost of goods sold ganesha six hundred units a multiply most of 56.25 371 thousand two hundred fifty okay and then your cost of sorry young gross profit my own is just the same sales capo minus that is your gross profit one hundred fifty six thousand seven hundred fifty okay steps [Music] and let's move on to moving average method okay so according to mamposa paragraph 27 under the weighted average cost formula the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased are produced during the period items average the average may be calculated on a periodic basis as each additional shipment is received depending on the circumstances of the entity computer okay so usually if the company prefers periodic system long then predator meeting is the weighted average but if you think it's more applicable nama compute now average cost kadab purchase then you use the perpetual method of moving average okay let's use the same problem for problem number for um moving average method okay so your first step is perpetual okay same concept receipt pumas of a warehouse is after all transactions you start with your beginning inventory of two thousand times fifty okay then you know just nothing three thousand times fifty five aparna young computational all available five thousand pagan total cost one hundred thousand plus one sixty five thousand two sixty five ang sabinates moving average method purchase average cost so 265 000 divided by 5 000 la la base 53 cost per unit 53 still at okay 185 thousand five hundred oh my bag purchase pack the thing in october 13. 2 000 units at 60 so 3 500 plus 2 thousand 5 one eighty five thousand five hundred plus one twenty thousand three hundred five thousand five hundred same drill purchase cost three hundred five thousand five hundred divided by five thousand five hundred fifty five point fifty five kaya nakaron kanan selling or sales transaction the three thousand six hundred units fifty five point fifty five nine gaga meeting okay and then same procedure for uh october 29 transaction one nine plus one thousand two nine add this at this 170 549 divided by two thousand eight hundred fifty eight point eighty one average cost purchased october thirty yen sales nothing 1500 units which will give you an ending balance of one thousand four hundred units at fifty eight point eighty one okay moving average purchase average cost okay this is one's column is also your cost of goods sold you just get the total of them 367 695 and this is your ending inventory 82 334. now to compute for your sorry for your gross profit your sales of 528 000 you deducted to the cost of goods sold of 367 695 your gross profit is 160 305. okay inventory costing procedures now to check your compute for the cost of goods available for sale and then competition attend per table of goods sold and ending inventory discrepancy it's perfectly fine case um these uh methods have their own advantages and disadvantages depending when the uh the prices in the market are rising or falling okay so thank you for listening and our next lesson is the measurement of inventories at lc and rv the lower of cost and net realizable value thank you for listening to sertzuwa and again subscribe the months a search was accounting lessons ph like the video and share it to your friends hit the notification bell button to alert you of my new uploads of video lessons comment your pagmetanong comment or suggestion and message me at kevintroydachua1994 gmail.com thank you for listening this has been search was accounting lessons ph to god be all the glory honor and praise thank you and have a great [Music] day [Music] is