the cost of the ending inventory may be computed as follows...
pricing out either the cost of goods sold or the ending inventory.
Teaching Research of Valuation of Issued Stock and Inventory Stock;
applying cost ratio to ending inventory
Hence the ending inventory consists of old goods in the earliest purchase.
Consequently, a physical inventory must be taken in order to determine the cost of the ending inventory at the end of an accounting period.
The business can determine the cost of ending inventory and the cost of goods sold directly from the accounts without having to count the merchandise.
When the periodic inventory is being used, a physical inventory must be taken to determine the amount of the ending inventory.
In the periodic inventory system, the amount of inventory at the balance sheet date is determined by counting and pricing the goods on hand.
Instead, at the end of the period, the business makes a physical count of the inventory on hand and applies the unit cost to determine the cost of ending inventory.
The method of pricing inventory is required to identify the units in the ending inventory as coming from specific purchases.
Using the same data as in the preceding illustrations, the cost of 180 units in the ending inventory is determined as follows...
Determination of ending inventory by the retail method is illustrated as follows...
Using the same data as in the preceding illustrations the cost of 18 units in the ending inventory is determined as follows...
Using the same data as in the preceding illustrations, the cost of 8 units in the ending inventory is determined as follows...
By comparing the results obtained from the four methods illustrated above, let us summarize the amounts computed for ending inventory, cost of goods sold and gross profit on sales under each of the four methods.
The cost of goods sold during the period is determined by subtracting the ending inventory from the cost of goods available for sale…
Cost of goods sold at the current period is computed by subtracting the cost of ending inventory from the cost of goods available for sale.