Accounting 101 with Jimmy Stewart

12 - FIFO & LIFO (Cost Layering Methods)


Listen Later

Today we will discuss the cost layering methods that are used within the periodic and perpetual inventory systems.
Assumptions for purchases:
50 units purchased on January 1 at $10 each (50 x $10 = $500)
100 units purchased on February 1 at $11 each (100 x $11 = $1,100)
150 units purchased on March 1 at $12 each (150 x $12 = $1,800)
Assumptions for sales:
250 units sold to customer on April 1 for $5,000
Journal entries to record purchases under Periodic Method (entry is the same whether LIFO or FIFO is being used):
January 1: Debit Purchases $500; Credit Accounts Payable $500
February 1: Debit Purchases $1,100; Credit Accounts Payable $1,100
March 1: Debit Purchases $1,800; Credit Accounts Payable $1,800
Total Debits to Purchases = $3,400 ($500 + $1,100 + $1,800)
Journal entries to record purchases under the Perpetual Method (entry is the same whether FIFO or LIFO is being used):
January 1: Debit Inventory $500; Credit Accounts Payable $500
February 1: Debit Inventory $1,100; Credit Accounts Payable $1,100
March 1: Debit Inventory $1,800; Credit Accounts Payable $1,800
Total Debits to Inventory = $3,400 ($500 + $1,100 + $1,800)
Journal entry to record sale - Periodic Method (entry is the same whether using FIFO or LIFO):
April 1: Debit Accounts Receivable $5,000; Credit Revenue $5,000
Adjusting journal entry to record Cost of Goods Sold and Inventory - Periodic Method (Using FIFO):
December 31: Debit Inventory $600 (for ending inventory); Debit Cost of Goods Sold for $2,800; Credit Purchases for $3,400; Credit Inventory for $0 (for beginning inventory)
Adjusting journal entry to record Cost of Goods Sold and Inventory - Periodic Method (Using LIFO):
December 31: Debit Inventory $500 (for ending inventory); Debit Cost of Goods Sold for $2,900; Credit Purchases for $3,400; Credit Inventory for $0 (for beginning inventory)
Journal entries to record sale - Perpetual Method (FIFO):
April 1: Debit Accounts Receivable $5,000; Credit Revenue $5,000
April 1: Debit Cost of Goods Sold $2,800; Credit Inventory $2,800
Journal entries to record sale - Perpetual Method (LIFO):
April 1: Debit Accounts Receivable $5,000; Credit Revenue $5,000
April 1: Debit Cost of Goods Sold $2,900; Credit Inventory $2,900
...more
View all episodesView all episodes
Download on the App Store

Accounting 101 with Jimmy StewartBy James Stewart

  • 4.9
  • 4.9
  • 4.9
  • 4.9
  • 4.9

4.9

382 ratings


More shows like Accounting 101 with Jimmy Stewart

View all
The Ramsey Show by Ramsey Network

The Ramsey Show

39,019 Listeners

The Knowledge Project by Shane Parrish

The Knowledge Project

2,666 Listeners

Accounting Best Practices with Steve Bragg by Steve Bragg

Accounting Best Practices with Steve Bragg

257 Listeners

The Daily by The New York Times

The Daily

112,454 Listeners

The Game with Alex Hormozi by Alex Hormozi

The Game with Alex Hormozi

4,409 Listeners

The Diary Of A CEO with Steven Bartlett by DOAC

The Diary Of A CEO with Steven Bartlett

8,434 Listeners

The Accounting Podcast by Blake Oliver & David Leary

The Accounting Podcast

335 Listeners

Small Business Tax Savings Podcast by Mike Jesowshek, CPA

Small Business Tax Savings Podcast

248 Listeners

The Daily Stoic by Daily Stoic | Backyard Ventures

The Daily Stoic

4,856 Listeners

On Purpose with Jay Shetty by iHeartPodcasts

On Purpose with Jay Shetty

27,904 Listeners

» Divine Intervention Podcasts by Divine-Favour Anene

» Divine Intervention Podcasts

1,007 Listeners

Real Estate Rookie by BiggerPockets

Real Estate Rookie

1,840 Listeners

Accounting For Beginners by Stephanie Yefimov

Accounting For Beginners

0 Listeners

The Mel Robbins Podcast by Mel Robbins

The Mel Robbins Podcast

20,362 Listeners

Build with Leila Hormozi by Leila Hormozi

Build with Leila Hormozi

919 Listeners